Investors eye Australian property

Country:  Australia

18 November 2008

Cautious investors, who have shunned residential property in Australia in light of the market downturn, may be on the brink of returning to the sector as interest rates drop and the share market remains volatile.

Some Australian housebuilders are reporting a marked increase in inquiries from investors over the past couple of months, gaining momentum after last week's 1% interest rate cut.

However, most agree that it is too soon to know if inquiries will convert into sales.

Denis Hickey of Stockland's development division, cautiously told The Australian: “There is more awareness and inquiries from investors.

“We are starting to see investors looking at property in pockets around the country.”

The economics of investing in property in Austalian appear to stack up: Interest rates are falling, rents are rising, there is a severe shortage of rental properties and the share market has collapsed.

Rental vacancies have fallen to just 1.7% in capital cities, the lowest level in history, according to Stephen Wilkinson, research officer with the Real Institute of Australia.

Mirvac managing director Nick Collishaw said share market volatility had moved some investors back to more traditional investments.

"Safe havens like residential real estate," Mr Collishaw said.

"Certainly in Sydney suburbs such as Rhodes (in the inner west) and Chatswood on the north shore, we think investors should be coming back."

Charles Griffin, general manager with Central Equity, a Melbourne-based apartment developer, said: "We have sold two thirds of our latest project."

It appears that residential property remains a bedrock of investment.

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