Demand

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The Satterley Property Group has seen no indication of softening demand or an impending price correction in its Victorian operations.
Jack Hoffmann, general manager of Satterley Property Group Victoria, noted the land market and the established market "were two very different beasts.” 
“We’re hearing all this talk of ‘is there or isn’t there a bubble?’ and that the established housing market, particularly the inner city apartment market, is in serious trouble.
"But this simply isn’t the case for the land market.”
 Satterley lay claim to around eight per cent of the Victorian land market with its portfolio having included Coburg Hill, Plenty River, Riverstone and Tarneit.
“The median land price grew by four per cent last year, which hardly indicates that we have entered a bubble.”
“While any price correction would inevitably have an effect on the entire market we expect that the land market, barring any unforeseeable event, would be largely sheltered from any significant impact,” Jack Hoffmann said.
He identified a consistent level of supply as a key factor keeping the land market from approaching bubble-like conditions.
“The reason that the land market has grown at a more sustainable rate than the established market is supply.
"The state government has done a good job of approving enough land for development, which is now readily developable, to satisfy demand.
“As a result you currently have around 170 active land developments in Victoria, compared to around 90 in 2010,” Mr Hoffmann added.
In 2013 Satterley Property Group announced plans to secure 10 per cent of the Melbourne residential new house and land market, with its successful bid for Victorian Government-owned land at Point Cook.
The company said in 2013 it believed the house and land package market in Melbourne was then close to the bottom of the cycle.
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No bubble with Melbourne house and land: Satterley

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A 12,000 square metre industrial site located a stone's throw from the proposed Perth Freight Link upgrade has been sold to a private investor for $4.8 million with no immediate plans for development.
The property, an industrial site at 30-36 Stockdale Road, O'Conner, has two street frontages, heavy vehicle access and is close to Fremantle Port.
It includes eight leased units and a further 7,000 square metres of land.
Greg O’Meara from Colliers International said strong demand had seen numerous smaller sites in the O’Connor and Bibra Lakes area snapped up.
"As Perth Freight Link plans progress, there would likely be more movement in adjacent areas as landholders and investors sought to take advantage of the long-awaited transport corridor upgrade," Mr O'Meara said.
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WA development site sells as land bank

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GUEST OBSERVER
The Inner Sydney apartment market has experienced a rise in demand for off–the–plan apartments in recent years, which has resulted in new supply reaching its highest annual total in fifteen years of 3,350 apartments in 2014/15. 
In particular, development in Inner Sydney has been dominated by large scale and high rise development in the following locations: 
<ul>
<li>City Core, including Quay (1), City Centre (2) and City South (3)</li>
<li>Pyrmont/Ultimo (4),</li>
<li>East Sydney (5),</li>
<li>Surry Hills (6)</li>
<li>South Dowling (7)</li>
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North Sydney (8) 
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APARTMENT PROFILE
Rental apartments account for 55% of total apartments in the ISA area, considerably higher than the 28% share across all Greater Sydney dwellings. This highlights the preference of investors to purchase low maintenance dwellings such as apartments, as well as properties close to good transport links and major commercial, retail and entertainment centres, such as a Central Business District, where tenant demand is likely to be greatest.
Owner occupied dwellings represented 34% of ISA area stock, with a greater share of these having a mortgage (being purchased). Conversely, an Inner Sydney apartment area significantly higher 65% of all Greater Sydney dwellings were owner occupied.
In addition, unoccupied dwellings—those that are held as second homes or kept empty as a speculative investment—comprise 11% of total apartment stock in the ISA area, compared to 8% across Greater Sydney. Despite relatively high new apartment supply in 2014/15 being forecast to continue through to 2018/19, unoccupied apartments share of total ISA area dwellings is not expected to substantially increase. Given the current deficiency of rental stock in the ISA area, the majority of investor purchased apartments are likely to be made available for rental. 
 
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 Rents, Prices and Yields
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Table 2 outlines the weighted median two bedroom (the most common type of unit) rent and weighted median unit price of the ISA area post codes, along with an indicative yield representing the rent divided by the price.
Tight vacancy rates of below 2% in Inner Sydney during the second half of the 2000s decade resulted in solid unit rental growth and the indicative yield in the ISA area improving to a high of 5.93% at June 2009.
Unit rental yields remained relative attractive over the following four years to June 2013, at above 5.5%. However, an easing trend emerged in 2012/13, as interest rate cuts from late 2011 started to lift purchaser demand, which drove solid unit price growth of 7.4% in 2012/13.
The low interest rate environment has persisted, strengthening investor demand, which has resulted in solid unit price growth of 10.2% in 2013/14 and an estimated 9.5% in 2014/15. Relatively low borrowing costs also reduced cash outflows for investors and diminished the necessity for landlords to seek a higher rental return, leading to rental growth of less than 1% in 2013/14 and a similar expected rise in 2014/15. Consequently, the indicative unit yield in the ISA area has diminished to an estimated 4.65% at June 2015, and slightly below the previous low 2003–2004 levels. 
 
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Angie Zigomanis is senior manager, BIS Shrapnel and can be contacted <a href="mailto:azigomanis@bis.com.au" target="_blank">here</a>.
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Inner Sydney's apartment constraints: BIS Shrapnel's Angie Zigomanis

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High demand for office space in Sydney and Melbourne is being quickly met, with the Brisbane market weakening and Perth and Canberra recording negative demand.
Underpinning the demand is the property and business services sector, which includes computer system design, engineering, technical services and architectural services.
BIS Shrapnel Senior Project Manager Maria Lee said that there has been a marked improvement in underlying demand since the depths of 2013 and that net absorption—which is already positive—will go higher. 
“We shouldn’t use recent history as a benchmark of what’s to come over the next few years," Ms Lee said.
"As demand comes through, the company forecasts higher rents will follow. But it’s a two speed economy and there is considerable variation city by city."
According to BIS Shrapnel, office space in Sydney and Melbourne accounted for 860,000 square meters of demand.
 
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Sydney, Melbourne hungry for office space: BIS Shrapnel

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Building products supplier CSR says its outlook is positive as housing starts look to climb to record levels.
With more than 200,000 starts expected in fiscal 2016, CSR hopes strong demand for products continues over the next few years.
CSR managing director Rob Sindel told shareholders at the company’s annual meeting an increasing number of people wanted to live closer to where they worked, which was fuelling demand for multi-residential housing closer to city centres.
The sector now represented around 45% of all Australia’s new dwellings.
AAP reported Rob Sindel saying CSR’s brick-making joint-venture with Boral expected to generate initial overhead savings of $7 million to $10 million a year once the two businesses were fully integrated.
Deutsche Bank upgraded CSR to a "buy" recommendation given housing start projections, even after adjusting for reduced multi-family product intensity.
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CSR sees housing construction uplift

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Demand for CBD office space nationally grew slightly in the third quarter of 2015, with Melbourne and Adelaide leading the way, according to Colliers International’s Q3 Office Demand Index.
It showed a small increase of one percent in national office enquiry to 534,226 square metres in the third quarter from 527,226 square metres in the previous quarter.
Enquiries for 3,000 square metre-plus office space, however, rose 20% over the previous quarter. 
Melbourne saw its largest demand in one quarter since the beginning of 2009, with a total of 239,594 square metres, 59% more than the same period last year. 
“We are seeing the evolution of the modern workplace, including the growing trend towards flexible and activity-based working, acting as a key driver for tenant demand in Melbourne,” said Simon Hunt, Colliers International managing director of Office Leasing.
He said business confidence was also on the rise. 
Adelaide saw an increase of 25% to 50,704 square metre in the third quarter compared with the second and a 2% rise year-on-year. 
“We expect Q4 this year to bring a significant amount of tenant decision in Adelaide, with the likes of NEC (3,000 square metres), the Department of Social Services (3,500 square metres) and the Administrative Appeals Tribunal (1700 square metres) all in the market to relocate."
One of the most active components of the market was the sub-500 square metres sector, he added, with most businesses trying to increase workplace efficiency. The majority of tenants in the current market are working on an employment density of between 10-12 square metre per person.
Enquiries in Sydney, however, fell a sharp 15% in the third quarter to 173,150 square metres from the second. This figure was still well above the average demand for Sydney since 2009.
Simon Crouch, Colliers International national director of Tenant Representation, said IT companies continued to lead the demand for office space.
“We have seen a shift by these companies, in focussing on Sydney CBD A Grade and CBD Fringe assets, driven by the need to attract the best talent, superior public transport and amenity,” Crouch said. 
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