Improved consumer sentiment and a healthier economic outlook is set to kick start a recovery for Australia’s retail spending, according to research from CBRE.
The CBRE Q4 Australia Retail MarketView highlights that the pace of retail sales improved significantly in the final quarter of the year, with retail turnover lifting 4.7% in the year to November 2013.
The large format asset class of the retail market has re-emerged as a dominant growth sector, with improved household wealth and consumer confidence underpinning an increase in dwelling starts.
CBRE Senior Research Manager Claire Cupitt said the large format sector was closely aligned with residential market activity.
“Dwelling starts rose 24% in the year to November 2013, underpinning consumer demand for household goods associated with new homes and alternations/additions,” Ms Cupitt said.
“This improved environment for large format retailers is expected to support rental growth in the market over 2014, which will be largely welcomed following a long period of lacklustre growth.”
By comparison, regional shopping centres recorded 0.1% growth in 2013, with this projected to rise by an improved 1.4% in 2014 and 2.5% in 2015.
Prime CBD retail experienced 0.6% growth during the same period, with 0.6% and 1.6% forecast for 2014 and 2015 respectively.
CBRE Head of Large Format Retail Australia Chris Parry said the large format sector in Australia was evolving, offering more secure and diversified retail mixes which would continue to drive demand, rental growth and ultimately yield compression in the sector.
“With the housing sector gaining momentum, large format retail assets will continue to perform strongly, particularly in New South Wales and Victoria where concentrated levels of growth remain,” Mr Parry said.
“Whilst new supply has slowed nationally in recent times, we are beginning to see a lift in construction. Developers and lenders are beginning to see the market as an opportunity, and previously mooted developments, are now either under construction or about to commence.”
Recent examples of new large format retail supply include the Joondalup Square development in Western Australia, which is anchored by Bunnings and Super Amart Furniture; and the Millers Road large format retail centre, anchored by Bunnings, JB Hi-Fi and Officeworks. The Millers Road centre will also be home to the first supermarket in a Victorian large format retail centre.
In 2013, there was a significant increase in overall retail investment activity, lifting 70% from 2012 levels – accounting for $7.7 billion worth of assets changing hands during the 12 month period.
CBRE Regional Director of Retail Investments Neil Proudlove attributed strong investor appetite levels to the ongoing strong fundamentals offered by the Australian retail market.
“Investors continue to target Australian retail assets, particularly centres which are supported by strong tenant profiles, stable incomes and development, income or capital growth potential,” Mr Proudlove said.
“Strong investor interest has returned to the large format retail asset class, supported by the upswing in the dwelling construction cycle. In hindsight, this asset class has been ‘over-sold’ during recent years.”
He added: “Centres with strong retail covenants are providing astute investors with excellent property returns.”
The report shows the emergence of foreign retailers within prime strip locations has created fresh retail and choice offerings for consumers, which has helped attract shoppers back to CBD locations.
A new wave of international competition is expected to enter Australia’s CBDs in 2014, including Uniqlo (above), H&M, Hollister, River Island and Forever 21. Following the opening of its first Australian store in Victoria last December, Japanese retailer Muji is preparing to open two further stores this year.
Queensland is the next property hotspot, experts say
As New South Wales and Victoria continue to experience weakness. Queensland is expected to take the lead, a National Australia Bank (NAB) poll of property professionals revealed.
According to the survey, industry experts project house prices in Queensland to increase by 0.7% next year and 1.3% in two years.
Some areas seen to perform strongly over the next year include Brisbane, Cairns, the Gold Coast, and the Sunshine Coast. Out of the suburbs, Coomera and New Farm are expected to realize robust gains.
Meanwhile, Queensland’s rental market is also poised to enjoy an upward boost, growing by 1.3% next year and 1.9% in two years. This is despite the stricter rules on housing investment.
The respondents of the survey also expect Queensland to retain foreign buyer interest. In fact, the share of foreign sales hit a four-year high of 22.8% over the previous quarter.
The results of the survey go against NAB’s own projection of the market. For instance, the bank expects house prices to remain flat in Brisbane over the next three years. Unit prices, on the other hand, is seen to fall by 4.5% over the next year.
NAB chief economist Alan Oster said Brisbane’s housing market seemed to be going sideways and its unit market still creates concern.
“It hasn’t peaked yet, so that’s good. We’re seeing quite strong economic activity in Queensland, so that always helps,” Oster said, as quoted by The Courier-Mail.
Gold Coast house values record the biggest growth in Queensland
The Gold Coast has recorded the strongest growth in house prices in Queensland over the past 12 months.
GOLD Coast house prices are leading the way in Queensland, up six per cent in the past 12 months to an average $620,000.
The latest figures by the Real Estate Institute of Queensland show homes on the Glitter Strip are $35,000 more on the same time last year.
Unit prices are up 1.9 per cent to $428,000.
REIQ data reveals houses on the Glitter Strip are worth $35,000 on the same time last year.
REIQ’s Queensland Market Monitor for March said the strong population growth came on the back of infrastructure projects such as the $550 million Gold Coast Health and Knowledge Precinct and M1 upgrades.
“The property market has been one of the big winners from the sporting event as the $1.5 billion infrastructure investment has boosted confidence and demand for housing in the region,” the report stated.
“We expect house prices will show an upward path in 2018. However, this growth will most likely be more moderate.”
A quiet real estate period leading up to, and during, the Commonwealth Games likely contributed to a slight drop (-0.3 per cent) in the March quarterly median sales price, the report reveals.
Andrew Henderson says a growing population and employment opportunities were contributing to a strong property market. Picture: Jerad Williams
REIQ Gold Coast zone chairman Andrew Henderson said he expected interstate migration to continue to benefit the city.
“I expect the market to remain strong,” he said.
“There is a heavy amount of interstate buyers moving here.
“I was at an auction recently where the winning bidder was from Sydney and the underbidder was from Melbourne.”
Mr Henderson said growing employment opportunities were also attracting homebuyers to the city.
The Gold Coast property market is expected to remain strong.
“We have some of the best health facilities in the country and our universities are world recognised.
“Those two things alone complement the tourism industry and the lifestyle aspects that the Coast offers.”
The report found the fastest-selling suburbs on the Coast included Worongary, Merrimac, Highland Park, Mudgeeraba and Carrara.
It also revealed the rental vacancy held tight throughout the first quarter of the year at 1.1 per cent.
Andrew Bell says the Coast had evolved from a tourist town into a vibrant city with an expanding economy. Picture Mike Batterham
Ray White Surfers Paradise Group CEO Andrew Bell said the Games heralded the next chapter for the Coast, as it evolved from a tourist town into a vibrant city with an expanding economy.
“The city’s property market is riding the irreversible momentum that has now come to the Gold Coast in terms of economic diversity and with more employment options we will need more housing options for people,” Mr Bell said.
“We are no longer going to be subject to tourism upsides and downsides as we were in the past because our economy has well and truly diversified beyond just tourism.”
Australia’s golden triangle of opportunity
It was great to be back on the Gold Coast for the 21st annual Australasian Real Estate Conference (AREC), attended by over 4,000 of Australia’s best industry professionals. While I was there I was once again reminded of how much potential the South-East Queensland property market is offering both sea changers and investors at this stage in its market cycle.
In my view, Brisbane is the best market in Australia currently for short to medium term price growth, with the value gap between it and the other big East Coast capitals as large as I’ve seen it in many years.
When you factor in the key drivers for future growth – liveability, affordability, scale and future economic prospects, they all suggest that Brisbane is a market to invest in. Check out the latest statistics from CoreLogic below.
Value gap – median house prices
Value gap – median apartment prices
I’ve been bullish on Brisbane for many years and in hindsight, I called its next growth phase a couple of years too early. It’s had some growth in recent years but there is a lot more to come over the next few years.
According to McGrath’s top prestige agent in Brisbane, Alex Jordan, one of the dominant trends today is downsizers buying up luxury apartments.
Alex says: “Despite the reported oversupply in Brisbane’s inner city apartment market, we are seeing great strength in the prestige apartment sector.
“The luxury apartment market ($1M+) is driven by owner occupiers, particularly baby boomers and empty nesters, who are attracted to less maintenance and better accessibility.
“Popular suburbs include New Farm, Newstead, Teneriffe, Kangaroo Point, South Brisbane, St Lucia, Paddington and the Brisbane CBD. These areas offer a desirable lifestyle with an abundance of shopping, dining and entertaining precincts at their doorstep.”
South East Queensland has so many options for asset-rich, cash-poor southerners. Many of our customers in Sydney and Melbourne are looking closely at South East Queensland both for investment and a potential sea change. I believe its affordability will continue to attract record levels of interstate migration.
If you live in Sydney or Melbourne and you’re struggling with the mortgage and cost of living, Brisbane is a fantastic alternative. It offers big city job opportunities, high quality education options and the chance to transform your financial future.
The boom delivered Sydney and Melbourne home owners a capital gain of up to 75% – that’s enormous new equity that could be cashed in to fund an amazing new lifestyle with far less mortgage stress up north. Plus, you’d be buying in just before Brisbane’s next wave of price growth. It’s the perfect scenario.
I believe the area from the Gold Coast to Toowoomba and up to the Sunshine Coast is Australia’s golden triangle right now.
Toowoomba, with its expanded airport facilities which have opened up easy access to the south, is the perfect and affordable treechange destination. Known as Queensland’s Garden City, about 2,300 people moved here from Brisbane last year for its cheaper house prices and enjoyable regional city lifestyle.
Both the Gold Coast and Sunshine Coast are also appealing sea change options benefitting from a raft of new infrastructure that will drive further population growth and generate more local jobs.
Brisbane is one of the world’s great cities but I don’t think this is fully realised as yet. If you haven’t been to Brisbane for a number of years, get on a plane. This is a thriving city that offers many of the lifestyle amenities you love about the southern capitals but at a much cheaper price.
I think Brisbane will also become very attractive to migration and investment from Asia in the years ahead.
South East Queensland is offering opportunity everywhere for both owner occupiers and investors alike. Now’s the time to consider what Australia’s premier lifestyle market can do for you!
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