Transcription of Finance News Network Interview with First National Real Estate CEO, Ray Ellis. Melissa Beaumont Lee: Melissa Beaumont Lee for the Finance News Network. Joining me to discuss the 2012 property market outlook is First National Real Estate CEO, Ray Ellis. Ray welcome back.
Ray Ellis: Pleasure to be here Melissa.
Melissa Beaumont Lee: First up, can you explain how the report is put together and who you survey?
Ray Ellis: Well we survey our 450 offices throughout Australia which covers from Broome to Hobart to Cairns, and our offices there gather local information of how they see the market going in their area. We then compile that as a national report. So rather than being an overview of Australia, it’s actually specifically detailed as to what is happening in your viewers’ area.
Melissa Beaumont Lee: And the report comes out twice a year, is that right?
Ray Ellis: Yes we do it at the beginning of the year and then we update it in June/July, so we can give another further summary of how the market is going.
Melissa Beaumont Lee: So what is the consensus outlook?
Ray Ellis: Well you can believe what you read in the papers, is that perhaps the market is softening a little bit and we’re seeing that. It’s certainly not returning to the glory days of five or six years ago, but we’re seeing a glimmer of hope that - as we say in real estate, it’s always a good time to buy and sell. And I think in the main, nationally we are over the worst of 2011.
Melissa Beaumont Lee: And what evidence do you see of a pick-up in confidence?
Ray Ellis: Well auction numbers in Melbourne and Sydney have improved on what was November and December figures, which means more people are out. The impact of the two rate reductions in November and December have now come into the market, and people have some confidence of moving back into the housing market, also the investment market. So there’s just a slight upsurge in buyer confidence and also coupled with the vendors are now realising that if a house is priced correctly, they do have an opportunity to sell.
Melissa Beaumont Lee: Now confidence can be fickle, what could derail the situation?
Ray Ellis: Well I think your viewers don’t have enough time today to go through what could derail the situation, but it’s the obvious ones. I mean we just had a no reduction in interest rates this month and some of the banks have increased their rates. Whilst that doesn’t have a greater affect in the actual cost of a mortgage, it does have an effect on the confidence and this is what we need to see return to the market. Also the political situation in each State can cause a derailing of situations of confidence. In New South Wales we’ve seen the Government introduce some stamp duty, legislation increases. We’ve seen the Queensland Government keep their programs for first homebuyers go through till after the elections. So State Governments are certainly aware of what they need to do to improve conditions in the market, but the big bugbear everywhere in all States is stamp duty. That’s still a major amount of money that people have to look at when they are investing in a house. So any reduction in stamp duty over the coming years, will be very good news for buyers.
Melissa Beaumont Lee: Now to the markets. Where will the strongest growth come from?
Ray Ellis: It’s obvious to say the mining States are leading the Australian economy at the moment and housing conditions there are going very well. Even though Brisbane is still affected by the floods over a year ago, State-wide we’re seeing a major improvement there in house prices. But the major growth is very patchy, we’re seeing suburbs adjoining another suburb yet having two different results. And what that means, a house or an investment or a commercial property that is well priced, close to amenities and offers investment return, or offers the features of a home are selling. But you must be realistic on your price and not expect conditions of two years ago to be the norm. The average reduction in the median price around Australia in 2011 was just over three per cent. Yet in some areas it was 10 or 11 per cent. We’re not expecting those reductions anymore, but the growth opportunity is to factor in those reductions, have now occurred and it is the perfect time to buy.
Melissa Beaumont Lee: And Ray let’s look at each of the States starting with New South Wales. Is it expected to be solid again in 2012?
Ray Ellis: Yes in 2011 New South Wales came off a low base of transactions, so there was a marked improvement and that’s actually continuing in the first half of the year. Even though it’s only early February, we’re still seeing conditions improve. So New South Wales as a constant performer is going to go very well in 2012. Regional New South Wales is a great success story. That Singleton/Gunnedah area where the mining activity is huge, there having very good sales, very good conditions in the market for improvement in those areas. And that’s the same all throughout regional New South Wales. Again it’s patchy, but New South Wales from an investment point of view and now is the perfect time to buy a new home, because of the stamp duty requirements that the State Government has introduced.
Melissa Beaumont Lee: What about Sydney?
Ray Ellis: Sydney, the largest city in Australia had two or three years in the gloom. We had a State election here last year in 2011. That gloom has been lifted, the buyers are out, the vendors now have to be ready priced to sell and they will sell their property.
Melissa Beaumont Lee: And the A.C.T?
Ray Ellis: The A.C.T, the forgotten State or Territory sometimes – just a consistent performer, never has unemployment, always has growth, always cash in the economy, just bubbles along. And areas, particularly in new homes in A.C.T will be very strong this year.
Melissa Beaumont Lee: Now to Victoria?
Ray Ellis: Victoria had record years in ’08,’09 and ’10, subdued somewhat in 2011 and that really hasn’t picked up yet. Even though the auction clearance rates have improved in January and February, we still haven’t seen it go off markedly yet. But the doldrums of the middle of 2011 will not return to Victoria in 2012 and it’s a similar story in all capital cities. Well priced properties are selling in Victoria once the expectations are being met. At the end of 2011 in Victoria, the expectation between the buyer and the vendor was too great; that caused a reduction in auctions and a reduction in sales. We’re now seeing that gap being lessened and as a result, sales are occurring.
Melissa Beaumont Lee: Queensland?
Ray Ellis: Queensland as I’ve said earlier, the floods were only 12 months ago now but the market has been in the doldrums for some time in Queensland. We’re seeing an improvement in the Gold Coast; we’re seeing a slight improvement in the Sunshine Coast. Of course Brisbane, which only about 20 per cent of the city was affected by the floods, we haven’t seen those values come back yet but we’re seeing careful consideration. Good times have not returned to Brisbane yet or the majority of Queensland, but there’s definitely an opportunity that we won’t be in the doldrums like the end of 2009 or 2010 in Queensland.
Melissa Beaumont Lee: Heading west, what about the mining States of South Australia and Western Australia, and the Northern Territory?
Ray Ellis: Well that’s half of Australia Melissa in one fell swoop. South Australia is a constant performer, the mining activity in the north of that State is now coming online and towns like Whyalla, Port Pirie, Port Augusta, Port Lincoln are seeing the benefits of that. Adelaide because of its low population growth and its solid performing as an investment asset, continues to bubble along nicely. I always say every time to your viewers or any public forum, if you’re looking for a solid investment Adelaide is always your safe bet, as you don’t get the highs and lows. It’s a constant economy, no great ups and downs, good State to invest in South Australia. Northern Territory, we just had the biggest gas development announced in Australia’s history to go through Darwin. They’ll need an extra 5,000 homes over the next two or three years. Darwin’s proximity to Asia and Alice Springs feeds off this as well, also Katherine. Darwin has been a hotspot for a number of years now and there’s no reason for that to decline in any circumstances whatsoever. Again, Darwin’s a great investment. Western Australia continues to have a small population. Most people don’t know mining only employs about 200,000 people in Australia, yet manufacturing’s over a million people. But the towns like Port Hedland, Karratha and even Broome which has no direct access to mining, they are set for continuation of good times. Again, many houses have to be built, construction, fly-in/fly-out workers in those mining towns now want to live in those towns, we need more houses. Perth is on the radar for being in increase in value this year because they’ve had two or three years of decline, after substantial growth of ’07 and ’08. So don’t underestimate Perth as not the highflyer it was back in ’07 and ’08, but again because it’s been in doldrums, we’re seeing a small increase of activity and a small increase in prices there. So I’ve got high expectations for Perth in 2012.
Melissa Beaumont Lee: And not forgetting Tasmania?
Ray Ellis: We can never forget Tasmania the Apple Isle. What Tasmania represents is a solid base for owning a home or investing in a home. You’ll not achieve the highs and lows perhaps of Sydney or Melbourne, but it’s an affordable marketplace to get in. Tasmania outside the two major cities is dotted with beautiful liveable towns. Burnie on the northwest of Tasmania - a wonderful town, good manufacturing, close to beaches and well-priced properties, so in Tasmania you’re getting safe and secure. If you think like the hare and the tortoise, Tasmania is a tortoise – always shows good returns.
Melissa Beaumont Lee: Can you give us some examples of towns that are on the move?
Ray Ellis: Well Singleton in New South Wales is a great example; we’ve had record months there since October. We cannot keep up with the demand there, supply is tight and that’s benefitting off the mining experience here in New South Wales, which seems to be a common thread throughout Australia. It’s the same situation in Port Hedland; demand is outstripping supply – good position to be in but hard when you want people to move into those areas. In Port Hedland for example, they’re building a little enclave of half a dozen exclusive homes close to the beach, just to attract doctors to that town. So different cities are doing different things to increase their supply, and of course the fly-in and fly-out workers as I said earlier, want to now live in these towns. Bendigo in Victoria continues to be a solid performer because like a lot of regional cities, they’re now receiving the benefits of the outflow of people from the major cities seeking a better lifestyle, in that towns now have all the facilities you’d expect from a big city. And of course if you go through all the major suburbs in Australia, there are pockets that are doing very well that are too numerous to mention here now. But if your viewers log on to firstnational.com.au, we always list which are the hot properties in various suburbs around Australia.
Melissa Beaumont Lee: And finally, what about the commercial sector?
Ray Ellis: Commercial sector’s been interesting the last couple of years. In the major capital cities of say Sydney and Melbourne, anything over $5 million has been hard to move - hard to find the buyers for that. Anything under $5 million has been a good solid growth there as small business enters the market and needs commercial space, a lot of commercial space wasn’t built. Of course the Energy Efficiency Acts, the Essential Services Act for example of Victoria is going to have an impact on landlords and rent, so we’re seeing some growth in rents at the moment. But the impact of that legislation is yet to be felt across the commercial sector because basically, the commercial sector doesn’t know how to deal with the cost associated with those provisions. But commercial, always a strong performer in Australia - hasn’t been a standout the last couple of years, but as new stock comes onto the marketplace, we should see an upsurge in the commercial activity.
Melissa Beaumont Lee: Ray Ellis thanks for sharing the results of the survey.
Ray Ellis: Pleasure. And I hope your viewersobtained some good information today and continue to tune into Finance News Network for their information of property market, or if they can’t get on to there, firstnational.com.au. Thank you Melissa.
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