TRANSCRIPTION OF FINANCE NEWS NETWORK INTERVIEW WITH FIRST NATIONAL REAL ESTATE CEO, RAY ELLISMelissa Beaumont Lee: Hello Melissa Beaumont Lee reporting for the Finance News Network. Joining me for a midyear property update on the market outlook is First National Real Estate CEO, Ray Ellis. First National has just released its midyear property outlook based on a survey of your offices.
Ray Ellis: Yes, earlier this year we outlined to our viewers our 2011 outlook and now available on firstnational.com.au is our midyear property outlook for the remainder of 2011.
Melissa Beaumont Lee: What’s the mood amongst agents?
Ray Ellis: The mood amongst our agents reflects the concerns in the community at the moment. Business has been very subdued in the first half of 2011 and this is reflected in the latest Dun & Bradstreet report, which shows business sentiment as at the same lows as before the GFC or the height of the GFC crisis three years ago. And profit and sales expectations are very low in their demand for the future.
What we’re seeing is confusion in the business environment, predominantly as a result of carbon tax and other issues and hopefully once they’re clarified, consumer sentiment not just in real estate, but the general economy will return.
Melissa Beaumont Lee: Okay, so a better half than the first appears likely, is that the general consensus?
Ray Ellis: Yes, the good news for consumers is that the interest rate rises expected and being predicted in the first half of 2011 now appear to be off the mark and in fact, a reduction interest rate seems to be on the cards. Of course the general economic conditions will determine that, but also there are other factors affecting particularly real estate. New home building approvals in May were down 7.9% against a forecast of 0.3%, so we’re looking for a rebound in the first home buyers. And we’re looking for a rebound in new home approvals and interest rates stabilising or even coming down as some analysts are predicting, would be good news in the second half of 2011.
Melissa Beaumont Lee: Good, thanks Ray. So with the softer market in the first six months and improvement in rents, are you expecting a pick-up in investor interest? And where are they most likely to invest, close to home or in the growth States?
Ray Ellis: The investor market in Australia is still buoyant. We’re waiting for the investors to come back, but as the share market softens and strong conditions return to the market, we’re expecting an upturn in investor involvement in our markets.
What we’re now seeing though is the Australian investor is now becoming very sophisticated. So the opportunity to buy the house or apartment down the street has actually turned into the opportunity to buy an investment in say, Port Hedland in Western Australia, which is one of the boom epicentres of the mining boom in Australia.
So the investor market can be very broad, it’s where you get the best returns. And with rentals at an all-time low throughout Australia, the returns are certainly there to be had.
Melissa Beaumont Lee: Now to the major capitals. What’s their outlook for the next half starting with our bigger cities, Sydney and Melbourne?
Ray Ellis: Touching on Sydney first, with the change of Government earlier this year, a new optimism is in our industry in Sydney and throughout the State. And what that means is a State Government finally willing to look at direct investment in affordable housing for young people and for people who want to get into the housing market.
So the Sydney market has improved and is expected to improve throughout 2011 as the general economic conditions improve in this State. So I’d be cautiously optimistic across all ranges of the market in Sydney.
In Melbourne, which has been the jewel in the crown in Australian real estate for the past eighteen months, the market has softened. If you have a look at the auction clearance rates they’re about 50 to 60% now, coming off highs of 80 or 90%. I think the market in Melbourne will continue to be strong, but not as strong as in the last eighteen months.
Melissa Beaumont Lee: Thanks Ray, next to Brisbane. Prices were weak before the floods and they’ve had a difficult six months, what’s the likelihood of a rebound?
Ray Ellis: It takes time to recover emotionally, let alone financially. So in 1974 the market didn’t rebound for four or five years after that event and indications are that’s going to be the same situation now. And what’s compounding the issue in Queensland is, nationally, migration has fallen by about 200,000 the past three years from overseas and, at the same time, migration into Queensland has fallen 40% by those traditional Sydney and Melbourne people retiring there.
So there’s a lack of influx of new population into Queensland which had a dramatic affect say on the Gold Coast. We’re expecting very cautious market conditions throughout the remainder of 2011 and ‘12.
Melissa Beaumont Lee: Thanks Ray. Moving further west, what’s the outlook for Adelaide?
Ray Ellis: Adelaide’s always a good market, it doesn’t have the boom and bust and I say this directly to your viewers, it’s a good solid performer. And as mining continues to grow in the north-western part of South Australia, good investment returns are available in Adelaide and even in the hills and surrounding areas.
I know Whyalla and Port Augusta are experiencing a mini-boom at the moment, so Adelaide should be on the market for investment.
Melissa Beaumont Lee: And Perth and Darwin?
Ray Ellis: Well, the great mining States are driving the Australian economy. And, having just returned from a tour of these regions and particularly in Port Hedland, where it took twenty-four minutes for an iron ore train to go past in a car and it was only a ten minute gap before another, if you want to see how these States are driving the Australian economy, travel to the great northwest.
In Darwin the INPEX Gas & Oil Exploration announcement is going to happen in the later part of this year and that will drive another 3,000 jobs, and up to 4,000 houses needed in Darwin. So The Top End and Darwin are set for boom with that announcement.
There’s expected to be a continuation of a downturn in the Perth market prices till the end of this year but then as prices stabilise, a return to normal conditions and growth opportunities in 2012 and ‘13.
Melissa Beaumont Lee: Thanks for the market outlook. Can you give us an insight into any trends in real estate marketing?
Ray Ellis: One of the great trends is the growth of social media and social media is your iPads, your Apps, Facebook. And, it’s an interesting stat, the fastest growth and the use of internet and those type of applications is 65 and above, as they communicate with their grandchildren and their friends around the world. So what’s happening is you’re seeing an explosion in the way information is distributed. And in real estate it opens up a whole new range for us. And, we at First National have driven the Facebook experience, we have SMS systems, we have iPad Apps available for property inspection reports. So, we’re in touch with the way the consumers wish to receive that information.
Melissa Beaumont Lee: Ray, to wrap up is there anything else you’re keen to add?
Ray Ellis: The Australian property market, the construction of new homes, the building and investments, the commercial market, drives the Australian economy in what is now called a two speed economy. I’m not discounting the mining boom, but the average Australian makes their wealth from property - either their home, their house, their investment or their rental property. And that has been forgotten in the political landscape at the moment.
And when Australia builds houses, builds factories and just builds, the Australian economy prospers and the Australian economy at the moment is in a depth of confidence, and confidence needs to return to the Australian market. And, I would encourage our leaders whose job is to give hope that tomorrow is going to be better than today, to look at how to encourage more Australians to build their property. Because if you do, you create happiness, you create wealth for the average Australian and that after all is what all Governments should be striving for.
Melissa Beaumont Lee: Ray Ellis thanks for the update and for taking the time to speak with the Finance News Network.
Ray Ellis: Always a pleasure, thank you Melissa.
ENDS
