Event: SA economic snapshot

The event featured insights from the REISA, Colliers International, Jones Lang LaSalle, Landmark Harcourts, and RP Data.

South Australia’s property professionals gathered for a local, national and global economic snapshot at the recent Australian Property Institute (API) State of the Market Conference.

The event’s key speaker was Dean Person, head of industry analysis at the National Australia Bank. Mr Person has over 20 years’ analytical experience, assessing the economic implications for both Australia and the world.

Mr Person said South Australian (SA) business conditions had been volatile over recent few years, with the state generally under-performing relative to the broader economy. However, he said recent surveys showed SA was reporting stronger conditions, despite headwinds to local manufacturing and mining sectors.

He remained positive about the SA and national outlook, with suggested moderate residential gains, and prices supported by low interest rates, improved affordability, population growth, supply issues and foreign buyers. However, unemployment would cap how high prices would go.

Mr Person was also positive about agri-business trends due to increasing incomes and urbanisation driving an increase in the developing world’s consumption of protein.

“This represents an extraordinary opportunity for premium Australian produce exports,” he said.

Residential update Tony Ricketts, vice president of the Real Estate Institute of South Australia (REISA)

Mr Ricketts has worked in the property industry for more than 30 years. He said that in Australia, the impact of the Global Financial Crisis (GFC) on the real estate market was minimal compared to other countries. Agents were reporting an increase in the level of activity in the first home buyers’ market and that new legislation driving more realistic pricing on auction reserves had led to increased confidence in the real estate process.

Overall, the outlook for 2014 showed continuing upward momentum and could indicate a volume increase in both sales and rentals. Lower interest rates seemed to be encouraging investors into the market and recovery should continue on an upswing as shown by increasing sales, less vendor discount and less time on the market.

“Real estate investment in Australia remains steady and is outperforming many other countries,” Mr Ricketts said.

Retail update Kate Gray, Colliers International associate director

Ms Gray is a commercial property research specialist and covers office, retail, industrial, agri-business property sectors in Adelaide, as well as metro office markets nationally.

“Retail sales are recovering and we have seen a turnaround in discretionary spending. Saving rates are starting to ease and people are spending. Employment is likely to remain a drag on retail sales in SA,” Ms Gray said.

She also discussed how retail investment trends were showing transaction activity driven by offshore investors entering the Australian market, either directly or through partnering arrangements. Online retailing in Australia had rapidly evolved, with many retailers reporting their online presence was their largest ‘store’ and that having a good online platform was supporting in-store sales.

Commercial sales & leasing update Roger Klem, director head of sales and investments at Jones Lang LaSalle

Mr Klem’s team recently negotiated the sales of numerous office towers, CBD development sites and retail shopping centres. He is an API Fellow and is experienced in all facets of property including valuation, commercial leasing and sales.

He said the Adelaide office leasing market had shown little growth in net absorption since the GFC. Supply had grown but was expected to slow. As this happened and demand improved, the current vacancy would be absorbed over the next few years, he said.

Overall the market overview was showing divergence between leasing and investment markets. There was an imbalance of low demand and high supply for office leasing, an expectation the leasing market will become more balanced, growing in 2015, and the low interest rate environment likely to remain the same.

Market update Tim Lawless, director of research for RP Data

Mr Lawless specialises in property markets analysis within Australia and is well known as a leading property market analyst and commentator. He said the combined capital city index showed strong capital gains on an annual basis, however quarterly growth was decelerating. Housing market conditions across the combined capital cities had been improving since June 2012 after a 7.7% peak-trough decline, which lasted 19 months.

On a rolling quarterly basis, home values had increased over 11 of the past 12 months and values across the eight capital city aggregate were 9.5% higher than a year ago. In Adelaide, home values had increased by 3.1% over the 12 months to February 2014.

“Overall Adelaide residents are showing surprising optimism when it comes to housing market conditions, with 76% of residents saying that it is a good time to buy,” Mr Lawless said. “Contrary to most other states, first home buyer demand is rising across South Australia”.

Rural update Simon McIntyre, south east region real estate manager, Landmark Harcourts

Mr McIntyre has 35 years’ experience in rural property sales, marketing, management and agency ownership. He discussed the factors involved when putting a value per acre on rural land, including rainfall and land productivity.

“We are seeing a strong price per acre for central and upper York Peninsula land as it is a fantastic area for cropping and is highly sought after,” Mr McIntyre said. “Pastoral SA has had minimal sales activity due to dry conditions.”

The wine industry may face significant issues over the next 12 months, with the 2014 price of grape varieties dropping by 17% for Shiraz to 31% for Chardonnay.