Investors Say Bottom of Property Market Has Passed - Colliers International Investor Sentiment Findings Show Majority Now Believe Property Clock is at 7 o’Clock

Sydney, Australia, September 18, 2009 --( Australia’s top institutional and private investors believe the nation is well and truly past the bottom of the property cycle and now heading towards upswing, according to new survey findings released today by Colliers International.

The second Colliers International Investor Sentiment Survey, conducted late last month, has shown investors around the country believe that if the property cycle were a clock, with the top of the market at 12 o’clock and the bottom at 6 o’clock, Australia moved upwards to 7 o’clock in Q3-09, after the majority of investors believed the same clock sat at 5 o’clock when they were first surveyed in May for Q2-09.

Participants, which were a broad cross-section of property investors surveyed to gauge their sentiment of the Australian market, had a wide range of property investment portfolio sizes, with 36 per cent of respondents having a portfolio in excess of $AUD1 billion, followed by 20 per cent valued between $100 million and $500 million and 16 per cent between $500 million to $1 billion.

The majority of investors, at 52 per cent, believe Australia is not only past the bottom of the property cycle, but 64% also believe the upswing will occur earlier than indicated in the first survey - by Q2/Q3 2010 or even earlier, instead of in Q4 2010.

Felice Spark, Colliers International Director of Commercial Research, said the positive response signifies that investor sentiment for Australian property markets has clearly improved over the past three months.

“We have seen a number of positive economic indicators come to light in recent months, and this has no doubt strengthened market sentiment and investor confidence with respect to property,” she said.

“Another positive quarter for Gross Domestic Profit growth, stable interest rates, and the unemployment rate not rising at the pace earlier predicted, have all contributed to the sense of growing optimism about the market recovery.”

When asked how they would describe their property investment strategy over the next 12 months, the majority of investors, almost half at 49 per cent, identified they were heading into growth mode, with 43 per cent in defend mode or holding steady. Only 8 per cent were expecting to contract holdings.

Investors also signalled the green light to purchase property is now definitely on. 69 per cent now expect to buy property in Australia over the next 12 months, up from 63 per cent in May.

Most investors, at 45 per cent, are looking to buy office property, with the top 5 buy markets identified as Sydney Office (20 per cent), Melbourne Office (15 per cent), Sydney Residential (7 per cent), Melbourne Residential (6 per cent) and Sydney Industrial (6 per cent).

John Marasco, Colliers International Managing Director of Investment Sales, said 65 per cent of investors believe Sydney will provide the best investment value of all markets, followed by Melbourne at 23 per cent.

Office was the most preferred investment sector with 57 per cent of investors identifying it as the sector which would provide the best investment value over the next 12 months. Sydney office was again voted the top spot in Australia for investment value.

Internationally, office markets were also the top pick, particularly in Asia and North America.

“Investors said their top priority in the coming year will be to maximise occupancy to secure cash flows, but selective acquisitions had crept up the list and has now become a more important priority as investors look to buy well,” he said.

“Refurbishment and value-add opportunities are also being increasingly considered this survey to reposition secondary buildings for the upswing.

“Investors also noted that the opportunities to buy are now, particularly to take advantage of mispriced under-valued assets, targeting distressed assets and the opportunities for scarcely traded prime grade assets which could come on the market.”

Mr Marasco said the top reasons for selling continue to be to reduce gearing or to sell up to reinvest elsewhere; however due to the recent capital raisings which have occurred, more investors said that the need to sell to release funds had diminished and a number were now not planning to sell and had withdrawn assets from the market.

The survey also revealed opinions on how property values had changed since the peak of the market before the Global Financial Crisis struck. Across the office and industrial sectors, the majority of investors believed values had declined by 20 to 30 per cent.

Residential was again the standout property sector with the majority of investors believing values had only declined by 1 to 10 per cent since the peak of the market, while 16 per cent believed residential values hadn’t changed at all, or even witnessed some growth. The majority of investors believe there will be no further softening to residential values and 8 per cent believe there will now be growth.

Colliers International (Australia)
Sarah Stewart
+61 2 9257 0210