Property News

Source:   Financial Review 3 May 2022 By Larry Schlesinger

 An industrial site in Sydney’s inner west that could yield more than 1000 apartments and a shopping precinct once rezoned is expected to sell for more than $300 million after being listed for sale by two prominent local families. 

The 3.12 hectare Five Dock property at 129 – 153 Parramatta Road and 53-75 Queens Road – about 11 kilometres west of the Sydney city centre – has already attracted the attention of major build-to-rent and build-to-sell developers both locally based and offshore. 

To be marketed as Kings Bay Village, the site has been amalgamated over more than 20 years by the Dodaro and Drivas families, headed respectively by commercial lawyer and Raine & Horne franchisee Robert Dodaro and developers George and Dimitri Drivas. 

It is home to more than 22,000 square metres of leased industrial buildings but is expected to be rezoned for mixed-use purposes this year as part of a proposal led by the City of Canada Bay Council aimed at transforming a portion of the Parramatta Road corridor running through Five Dock into more community-friendly infrastructure. 

Once rezoned, the site could support more than 90,000 square metres of gross floor area, including multiple residential towers as high as 20 storeys. 

With the median apartment price in Five Dock about $1 million, a future development could yield well over $1 billion of residential and retail end value in an area facing an undersupply of apartment stock, according to selling agents James Cowan, Matthew Meynell and Trent Gallagher from Colliers. 

“The site is difficult to price given the rarity of the offering. However, interest before the launch of the official sales campaign has been north of $300 million from both build-to-rent and build-to-sell groups,” Mr Cowan said. 

Its prime inner-city location, a 10-minute walk from both the Burwood North and Five Dock Metro Stations that are to be built as part of Sydney Metro West, is expected to draw in competing bids from major developers. 

The Australian Financial Review understands that those showing interest in the site include global BTR specialists Greystar and Sentinel as well as the likes of Sydney-based developers Meriton, JQZ and Deicorp. 

“Our recent experience in marketing significant, generational, assets such as Kings Bay Village has demonstrated the vast depth of capital seeking bulk and scale,” said Mr Gallagher. 

Source:  ABC News Australia   3 May 2022  by Business Reporters Michael Janda and Emilia Terzon

The Reserve Bank has increased interest rates for the first time in more than 11 years, with a 25-basis-point hike taking the cash rate target to 0.35 per cent. 

Key points: 

• The Reserve Bank's 25-basis-point increase to the cash rate target takes it to 0.35 per cent 

• The RBA governor warns that getting inflation under control "will require a further lift in interest rates" 

• Financial markets and economists expect the next official rate rise to occur in June.

If passed on in full by banks, the rate rise will add $65 a month to repayments on a $500,000 mortgage, and double that on a million-dollar loan. 

The Commonwealth Bank was the first major bank to respond, raising its standard variable mortgage rates by 25 basis points across the board from May 20, while ANZ will lift rates by the same amount from May 13. 

The move came as little surprise to financial traders, who had priced in around a two-thirds probability of the RBA raising rates this month. 

Reserve Bank governor Philip Lowe said the combination of recent very high inflation numbers and evidence that workers were starting to get bigger wage increases meant the time was right for "normalising" interest rates away from emergency lows. 

"The board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time," he noted in his post-meeting statement. "This will require a further lift in interest rates over the period ahead." 

Mr Lowe told reporters that the cash rate still had a long way to go to get back to more normal levels where it at least matched the rate of inflation. 

"Over time it is not unreasonable to expect interest rates would get to 2.5 per cent. 

"How quickly we get there, and if we do get there, will be determined by how events unfold."

Economists at the major banks remain deeply divided about how high interest rates would rise — from a 1.6 per cent forecast at the Commonwealth Bank up to more than 3 per cent tipped by ANZ. 

Westpac was somewhere in the middle, tipping a 2 per cent cash rate sometime next year. 

RateCity estimates that would add $512 a month to a $500,000 mortgage, and double that — $1,025 a month — to a million-dollar loan.  

Source:  Business Australia   3 May 2022  by (Staff Writer)

During a meeting on Tuesday, 3 May, the RBA board decided to increase the cash rate target by 25 basis points to 35 basis points. It also increased the interest rate on Exchange Settlement balances from 0% to 25 basis points. 

“The board judged that now was the right time to begin withdrawing some of the extraordinary monetary support that was put in place to help the Australian economy during the pandemic,” the RBA said.  

“The economy has proven to be resilient and inflation has picked up more quickly, and to a higher level, than was expected. There is also evidence that wage growth is picking up. Given this, and the very low level of interest rates, it is appropriate to start the process of normalising monetary conditions.” 

The RBA said its central forecast was for Australian GDP to grow by 4.25% over 2022 and 2% over 2023. “Household and business balance sheets are generally in good shape, an upswing in business investment is underway and there is a large pipeline of construction work to be completed,” the central bank said.  

“Macroeconomic policy settings remain supportive of growth and national income is being boosted by higher commodity prices.” 

The RBA observed that inflation has picked up significantly and by more than expected, although it remains lower than in most other advanced economies. Over the year to the March quarter, headline inflation was 5.1% and in underlying terms inflation was 3.7%.  

The Australian Chamber of Commerce and Industry (ACCI) warned of rising prices back in December 2021, when it released its latest ACCI-Westpac Survey of Industrial Trends.  

In the December quarter, input cost pressures remained elevated, with a net 38% of firms reporting higher input costs. The sustained period of cost pressures over the past previous three quarters, at a net 39%, was the highest average level since December 2008 

“Cost inflation has been a significant issue throughout the COVID pandemic and recovery, with supply chain disruptions globally and domestically, border closures, and a tight labour market all viewed as contributing factors,” the ACCI said.  

Following Tuesday’s rate hike, the RBA stated that it was committed to doing what was necessary to ensure the inflation in Australia returned to target over time.  

“This will require a further lift in interest rates over the period ahead. The board will continue to closely monitor the incoming information and evolving balance of risks as it determines the timing and extent of future interest rate increases,” the bank concluded. 

Source:  ABC News Australia   2 May 2022  by  business editor Ian Verrender.

A week ago, barely anyone was talking about a pre-election interest rate hike. 

Now, there's a tsunami of professional opinion pointing to a lift in the official target cash rate on Tuesday, following last week's dramatic rise in inflation. 

Prices now are growing at their fastest in 20 years. 

For a government campaigning for re-election on cost-of-living pressures, the March quarter numbers delivered a hammer blow. Perhaps not fatal, but hugely damaging, nevertheless. 

An official hike would merely add to the pain and heighten the political embarrassment. But there's one thing the forecasters have overlooked. It has nothing to do with the independence of the Reserve Bank of Australia and its desire to remove itself from the political process. 

It is this: The RBA really doesn't want to raise interest rates — at least not to anywhere near the levels many now believe are inevitable. 

Certainly, there's a logical argument that with unemployment below 4 per cent and headline inflation above 5 per cent, the economy appears to be overheating. Under those circumstances, there is no justification for emergency-level rates at 0.1 per cent. 

But during the past 30 years, the RBA — in association with the banking regulator, the Australian Prudential Regulatory Authority — has helped create one of the globe's biggest asset price bubbles. And if it unravelled, it would wreak havoc with the financial system and the economy.

Australia now finally is captive to real estate. We aren't the only country to have allowed this to happen. But we are one of the most egregious examples. 

Our banking system, which for decades has prospered on the back of soaring property prices, has become hostage to a $9 trillion monster. And while our politicians for years berated each other over relatively insignificant levels of government debt, they conveniently ignored Australia's real economic Achilles heel: household debt. 

That's now hobbled our central bank. It can't raise rates to anywhere near the level it may require without causing utter chaos. 

Perverse as it may seem, our perilous personal debt situation could be the saving grace for those who recently geared themselves up to the eyeballs. 

We simply can't afford to have so many go broke! 

Money markets are in meltdown mode. Bond investors — here and across the globe — have suffered enormous losses as a decades-long boom suddenly has reversed as inflation has awoken from a 30-year slumber. 

These are the markets that ultimately determine how much we pay to borrow cash. And if you believe them right now, official rates are on course to hit 3.5 per cent by October next year. 

That's the equivalent of 14 rate hikes in 16 months.

Given our booming labour market and accelerating inflation, there's a certain logic to their argument but it ignores one vital bit of the economic puzzle. 

Rate hikes of that magnitude would send vast numbers of Australians — mostly young, recent first home buyers — to the wall. It would severely depress the housing market, in turn putting the banking system under enormous pressure and plunging the economy into recession. 

That is just not going to happen. 

Here's a graph the RBA published a few weeks ago. The left-hand side shows how rich we've all become as real estate has soared when compared to our incomes. On the right, is the trade-off. Australian households are carrying record levels of debt, secured against those expensive houses. 

It truly is a house of cards. 

Source:  SMH   14 April 2022  by By Kate Burke and Melissa Heagney

Sydneysiders are paying $50 more a week to rent a house, with the median rental asking price rising at the fastest annual rate in 13 years. 

Despite holding steady at a record median $600 for the March quarter, Domain’s latest Rent Report showed house rents in Greater Sydney were up 9.1 per cent for the year. (Source: Domain Rent Report Q1 2022) 

Unit rents climbed $30 over the year, or 6.4 per cent, to a median of $500 – the sharpest annual increase in eight years. Rents lifted 2 per cent in the past three months alone, doubling the previous quarterly growth and outpacing houses for the first time since the pandemic began. 

Sydney’s rental market is now the third most expensive for houses, after Canberra and Darwin, with respective medians of $700 and $610. 

Domain’s chief of research and economics, Dr Nicola Powell, said Sydney’s rental market had seen a swift recovery after demand dropped off earlier in the pandemic, particularly in the inner-city. 

Renter demand had spiked as domestic and international borders reopened, while high purchasing prices left more aspiring homeowners renting for longer. 

“We may also be seeing the homecoming of city escapees from lifestyle and coastal locations, further driving demand,” Powell said. 

Increased competition for rentals, and lower supply, saw the city’s rental vacancy rate drop to 1.4 per cent in March, the lowest point since Domain vacancy records began in 2017 and down from a peak of 3.8 per cent in April 2020. 

“Vacancy rates are dropping like a stone in both Sydney and Melbourne and that’s driving rental growth,” ANZ senior economist Felicity Emmett said. 

Sydney’s previously elevated vacancy rate had quickly turned around as borders reopened, boosting demand – particularly in inner-city areas popular with international students – which had driven stronger rent hikes for the apartment market.

Meanwhile, rental stock had reduced, with some landlords opting to sell investment properties earlier in the pandemic. Properties were also being returned to the short-term holiday market now that tourism had resumed. 

Rental supply issues largely seen for houses in outer areas in recent years, as tenants flocked to bigger homes and outer suburbs amid lockdowns and remote working, were now shifting to inner areas, putting upward pressure on rents. 

The city and inner south recorded some of the sharpest rent hikes over the quarter, with house and unit rents both jumping more than 5 per cent. House rents held at record highs on the northern beaches, the outer west, the Blue Mountains, Baulkham Hills and Hawkesbury regions. 

The northern beaches was the only area to record a decline in apartment rents over the quarter, falling from a record high of $650 to $630. (Source: Domain Rent Report, March quarter 2022) 

“We talk about that ceiling price in the sales market … and I think a similar thing may be happening in the rental market,” Powell said. 

“Budgets can only stretch so far, people will compromise on property type and then compromise on location. Other areas are offering much better bang for buck for tenants.” 

Northern beaches local Heidi Malligan said it was “near impossible” to secure a rental, with tenants facing strong competition and high prices, with the median asking rent for houses up 9.5 per cent over the year to $1150 a week. 

Malligan’s family moved into a four-bedroom house in Frenchs Forest this week, paying $20 above the advertised rate of $1700 to secure the keys. 

“We had to adjust our expectations and be willing to offer more to secure a place,” Malligan said, adding she offered up to $80 above the advertised rate and to pay rent up to 12 months in advance, on other properties she missed out on. 

Renting short-term, between selling and buying a home, she said she felt for long-term tenants and noted an undersupply of affordable housing meant poor quality properties were commanding high prices. 

Demand was back to pre-pandemic levels, and now even stronger for some properties, with homes typically seeing five applications after a single viewing. 

“Even smalls studios that weren’t all that popular [last year] because people wanted to have more space ... are now finding tenants relatively quickly,” she said. 

Those hoping the cooling conditions seen in the sales market would flow through to the rental market may be left disappointed, with independent economist Saul Eslake saying while prices were predicted to soften this year, as interest rates rise, it would not affect rising rents. 

“There is not much connection in my view between property prices and rents,” Eslake said. 

“If you look back at late 2017 to mid-2019, prices went down in Sydney and Melbourne but that had no impact because there were no falls in rents during that period.” 

Rents would rise when demand was high and supply low, he said. 

Source:  SMH  5 April  2022  by Kate Burke 

Australian tenants face a worsening rental crisis, with competition for homes soaring as the proportion of vacant rental properties falls to its lowest level in years. 

The national rental vacancy rate fell to 1 per cent in March, halving year-on-year, with all capital cities now operating in a landlord’s market, Domain’s latest Rental Vacancy Rate report found. 

Landlords in competitive markets are being inundated with applications amid the shortage of available rentals, and tenants are increasingly offering above the advertised price, or up to a year’s rent in advance, to try to secure a home, agents have reported. 

Domain’s chief of research and economics, Nicola Powell, said Australia was facing a rental crisis, with already strained rental markets under increased pressure following the reopening of international and domestic borders. 

“With many cities already sitting at record high asking rents, combined with the current tightening conditions, we’re likely to see rental price increases continue, causing worsened conditions for tenants,” Dr Powell said. (Source: Domain.com.au)  

Vacancy rates nationally, as well as in Sydney (1.4 per cent), Canberra (0.5), Brisbane (0.7), Adelaide (0.2) and Perth (0.5), have reached their lowest point since Domain records began in 2017, and Darwin (0.5) is close to a record low. 

Hobart recorded a marginal increase, but with a rate of 0.3 per cent it remains one of the most competitive capital city markets. 

“In some of our cities it is like finding a needle in a haystack when trying to find an available rental,” Dr Powell said. Sydney and Melbourne had the biggest monthly fall in vacancy rates, now at 1.4 per cent and 1.8 per cent respectively. 

Dr Powell said inner-city markets hard hit during the pandemic were subject to a resurgence in demand as borders reopened and tenants took advantage of lower rents. While demand had risen, supply had fallen, with some rental properties having been sold during the pandemic while others came back to the short-term rental market as tourism resumed. 

Inner Brisbane, which recorded a vacancy rate of 1.5 per cent, had one of the largest monthly falls of the capital city regions. As did areas such as Indooroopilly, Sherwood, Nathan and Salisbury. 

“There’s a lot of people out there searching right now; a lot of places are getting snapped up pretty fast,” said Kelsey Smith, a business development manager at Living Here Cush Partners. 

Rental demand had risen as Brisbane attracted more interstate arrivals and rapidly rising property prices left more aspiring homeowners renting for longer, Ms Smith said. The recent floods had further exacerbated the rental shortage in some markets, she added. 

While she did not want to encourage rent bidding, Ms Smith said strong competition was prompting more tenants to offer above the advertised rental price, noting that one Bulimba home recently leased for an additional $50 a week to tenants relocating from interstate. Landlords, meanwhile, were increasingly looking to test demand with above-market prices, which they would lower if they had no takers. 

Inner-city markets have registered large declines in vacancy rates, and the strongest competition is still being seen in middle to outer ring suburbs and lifestyle locations, which tenants flocked to while working and studying remotely during the pandemic. 

In the Maroondah region in Melbourne’s east, which has one of the city’s lowest vacancy rates of 0.6 per cent, nine out of 10 homes were being leased after the first open home, said senior property manager Anne Johnsen, of Fletchers Maroondah.

In a bid to beat the competition, more tenants were offering to pay above the advertised price, typically up to $20 a week extra, and some were offering several months’ worth of rent upfront, sometimes a year in advance. 

“It’s crazy – that’s how desperate people are to secure a home,” Ms Johnsen said, adding that personalised letters appealing to landlords and property managers were also becoming more common. 

Declining vacancy rates and rising rents were making it harder for tenants to find, and hold on to, an affordable home, said Tenants’ Union of NSW chief executive Leo Patterson Ross. Renters were increasingly compromising on the size, location and quality of properties to secure a rental, while existing tenants were more likely to let unanswered repair requests or other breaches of the tenancy contract slide. 

“They know they are susceptible to being asked to move on and will have a hard time finding somewhere and likely face higher rent for a smaller place or have to move even further away,” Mr Patterson Ross said. 

Rents were on the rise for existing tenants, with even greater hikes between tenancies, and more properties were now leased above the advertised rate, with rent bidding on the rise. 

Increasing housing supply was key to addressing the crisis, Mr Patterson Ross said, particularly social and affordable housing targeted at helping those left behind by the private market. Such tenants would not be in a position to use first-home buyer assistance schemes to purchase a home – which Prime Minister Scott Morrison recently described as the best way to support renters. Boosting the supply of social and affordable rental housing would ease pressure for the most affordable rentals, which would then flow through to the broader market, he said. A national housing strategy was also needed, he said. 

(Please note this article was updates since it was published to reflect new information made available after publication. )