The overall residential market continues to show weakness but according to the latest minutes from the RBA’s monthly board meeting, the housing market is showing “tentative signs” of a pick-up.
The minutes from the August 7 monetary policy meeting read,
“Prices had increased a little in recent months, but remained somewhat lower than a year ago.
“Demand for housing finance was broadly unchanged over the year. With building approvals rising from low levels, the outlook for residential construction activity was more positive for the second half of the year. Earlier falls in interest rates and rising rental yields were likely to have increased the attractiveness of housing investment.”
The listed property sector has delivered solid full year results over the reporting season with Mirvac Group leading the gains.
Real Estate industry figures
Global ratings agency Fitch has reported overall mortgage defaults were slightly down, year on year with further improvements expected in the third quarter. Queensland recorded the most delinquencies with its soft housing market impacting the result.
The Real Estate Institute of Queensland has released median house prices for the greater Brisbane area. The June quarter showed a rise of 1.9 per cent in house prices despite a fall in the number of homes financed. The suburbs of Runcorn and Mansfield posted the highest price rises.
The national rental vacancy market has remained subdued for July according to SQM research. Rental vacancy figures slipped 0.1 per cent. Most capital cities either remained the same or slipped marginally during the month, with Canberra the only capital city to experience an increase in vacancies, climbing 0.3%.
Turning to the residential property market and fewer homes across the country were listed for auction on Saturday according to auction clearance rate figures released by Australian Property Monitors. Sydney recorded a 59 per cent clearance rate from 218 properties for auction, Melbourne 51 per cent clearance rate from 157 properties, Brisbane 41 per cent from 32 properties and Adelaide cleared 34 per cent from 26 reported auctions.
Commercial property sector
Returns in the office market have delivered strong returns in the financial year compared to other commercial property sectors. According to the industry benchmark PCA-IPD* property index, capital values climbed 0.4 percentage points.
Shop leases have started to fall amid weak retail conditions. Both Westfield Group
(ASX:WDC) and GPT Group
(ASX:GPT) said they have cut rents for new tenants by an average of 6 per cent as well as providing additional lease incentives.
Reporting season is in full swing for Australia’s listed property sector. Mirvac Group was the standout this week with a 128 per cent jump in its net profit. The diversified property manager and developer has forecast a 0.9 per cent rise in earnings for the year ahead.
*The total value of the PCA/IPD Australian Property index is A$136billion (as at June 2012) covering 1629 investments from 54 major landlords. The index dates back to 1984.
Full year results
Commonwealth property Office Fund
(ASX:CPA) has boosted its annual profit by 29.7 per cent to $256.4 million. The trust posted a 10.5 per cent rise in earnings per unit to 7.6 cents but warned its Sydney and Melbourne markets could soften over the next two years as the financial services sector continues holds back rental growth.
CFS Retail Property Trust
(ASX:CFX) has posted a decline in its full year net profit of $409.2 million down from $532.2 million which it says was largely due to lower increases in valuations than the previous year. Looking ahead, the property group says it will focus redeveloping current assets and roll out digital in-mall advertising screens and anticipates 3 per cent growth in its retail specialty sales in the 2013 financial year. CFS declared a final dividend of 13.10 cents.
Charter Hall Retail REIT
(ASX:CQR) has reported a steep decline its full year net profit of $9.7 million, down from $62.2 million the year before. The property group says unrealised non-cash movements impacted its result. Charter Hall delivered 3 per cent earnings per share growth underpinned by a strong and secure income stream as well as reweighting assets to Australia.
Mirvac Group
(ASX:MGR) has reported a surge in its full year net profit by 128 per cent. The property developer posted a net profit of $416.1 million, total revenue eased 7 per cent to $1.75 billion. The full year results were aided by the sale of its hotel management business during the year.
Online real estate advertiser REA Group Limited
(ASX:REA) has reported a 29 per cent jump in its full year net profit. The publisher of realestate.com.au generated a net profit of $86.8 million in fiscal 2012 and has achieved 15 per cent growth in its Australian residential, commercial and media business and surpassed one million downloads of its realestate.com.au mobile apps.
Westfield Group
(ASX:WDC) has increased its net profit by 31 per cent to $800 million in the first half of the 2012 calendar year. The shopping centre investor’s interim result was aided by $4.8 billion of gross proceeds from the joint venture of 12 assets in the US and the divestment of non-core assets.
GPT Group
(ASX:GPT) has boosted its first half results by 13.3 per cent coming in above expectations. The property trust delivered a net profit of $275.5 million for the six months to 30 June 2012. The interim result was underpinned by its active portfolio management which saw 4.3 per cent comparable income growth. GPT says it continues to actively address structural changes in the sector and maintains a positive outlook for the second half of the year with earnings per share growth of 7 per cent.
