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State of the nation
With great focus on the price of property, experts are applying a hands-on approach, Turi Condon reports
November 26, 2005
TIME is ticking by. For the housing market it's past midnight and the worst is over. The residential markets of Sydney, Melbourne and Brisbane are stabilising, though this will take time.
In Perth, housing is hot, but it's not quite the witching hour.
Macquarie Bank has mapped the state of the nation's property markets on the face of a clock where midnight marks the peak of the cycle.
On the clock, residential investment property, mostly apartments, is well into the early hours of the morning or mid-downturn, the eastern seaboard capitals' housing markets are just about to see daylight, while the nation's office towers are in the early upswing of a sunny afternoon.
Retail property is approaching the top of the cycle around 11pm.
Australia's residential property markets peaked in the spring of 2003 and, apart from Western Australia, have seen two years of slowing sales and declining or stagnating prices.
Typically, sagging housing prices last for about 18 months, according to Macquarie Bank's head of property research Rod Cornish.
He expects a two- to three-year period when housing prices, particularly in Sydney and Melbourne, are stable.
"There will be some variation -- prices will rise for a couple of quarters, then there may be a couple of quarters of falls," he says.
Cornish says a bounce in housing finance tends to happen about nine months before house prices begin to recover.
The Reserve Bank of Australia's latest figures show housing loans to owner occupiers are rebounding, up 3.7 per cent by value in the September quarter.
For investment property, typically apartments, mortgage finance was up 2.1 per cent on a value basis.
"It will take time for investors to come back," Cornish notes.
Another indicator is the number of people walking through housing display villages, and that too is on the rise, according to Cornish.
One of the brighter spots in the long term will be lifestyle property.
Though coastal markets have come off the boil and prices are down, Cornish notes key areas have shown higher average annual price growth than capital cities over the past 10 years.
While Sydney's average annual house price increased 9.4 per cent, Palm Beach romped along at 15.5 per cent.
Brisbane's house prices rose 8.6 per cent a year while Noosa Heads grew 12.3 per cent.
Melbourne was up 9.6 per cent compared to Portsea's 11.6 per cent.
"There is no reason why this trend won't continue," says Cornish.
The housing market is still hampered by low affordability, but nowhere near the levels of the late 1980s when it took 60 per cent of the average wage to meet mortgage payments for a Sydney home.
Now it's 36 per cent.
Strong employment figures, the big bonus being paid and the healthy stock market have buoyed the top end of the market.
Macquarie Bank alone paid $1 billion of bonuses to its 6500 staff this year, with one analyst quipping that that in itself put a floor under Sydney's eastern suburbs and north shore home sales.
Tempering the outlook will be movements in interest rates and unemployment.
Unemployment is expected to edge up marginally from the current 5.2 per cent, but is unlikely to have much impact on the housing market compared with the downturn of the early 1990s when unemployment levels reached 11 per cent and interest rates hit 17 per cent, sending housing prices into freefall.
Earlier this month, the RBA warned that inflationary pressures could prompt a rise in rates from the current 5.5 per cent cash rate. Macquarie Bank predicts two interest rate rises totalling 0.5 per cent by mid-2006.
A consensus forecast from 21 economists suggests rates will remain unchanged at June next year.
Investment bank JP Morgan expects the status quo to persist all year but is one of the analysts sounding a note of caution, saying house prices still have further to fall in some areas.
Another pessimist is Aussie Home Loans managing director John Symond, who earlier this month warned that sectors of the market such as investment property and the first home buyers belt may have price falls of up to 10 per cent.
He argues that heavily mortgaged buyers will be at risk if interest rates do rise next year.
Given that the outlook is fairly benign, buyers don't believe housing prices will surge in a hurry and are not feeling under pressure to rush into the housing market.
"There's a lot of people sitting on the sidelines," Cornish says.
Ray White Real Estate chairman Brian White says that removing the vendor tax in NSW in August restored some confidence, not only affecting NSW but sending a ripple effect through other markets.
"The psychological impact has been very important," he says. "It's underpinning confidence for the next year." The residential markets are in equilibrium -- there are few areas of excess supply or demographic changes that haven't already been documented, says White.
"There are no big shifts on the horizon. One thing the markets like is a status quo."
The same applies to the commercial markets, where listed property trusts which own the bulk of big office buildings, warehouses and shopping centres have been "roaring their heads off", as White puts it.
Listed property trusts, which make up 10 per cent of the S&P/ASX 300 Index, have been dragged along by the strength of the equities market, but have also captured investors' attention with their solid returns.
Earlier this year, Russell Investment Group found listed property provided after-tax returns of between 10 per cent and 12.3 per cent a year, depending on the investor's tax bracket, in the decade to December 2004.
By comparison, Australian shares returned 9.2 per cent to 11.6 per cent a year.
Residential investment property returned 10.6 per cent over the same period.
While the returns won't match the stellar run of the last couple of years, investment bank UBS expects Australian listed property trusts to offer a total return of 8 to 9 per cent next year compared with a broader equities return of 8.5 per cent.
Underpinning this is the solid outlook for commercial property.
Analysts have questioned how much more yields for commercial property can come down, but head of Westpac Bank's property markets, Frank Allen, believes the weight of money flowing into superannuation will continue to drive capital growth.
This is most likely in the office market, which to date has been the weakest of the sectors because of soft demand from tenants.
On Macquarie Bank's property clock most of Australia's office markets fall into the early upswing phase.
Brisbane's office market sits in the strongest position, with Cornish noting that the city's office rents have risen 38 per cent since 2002. Perth, driven by the resources boom, follows.
Question marks still hang over Melbourne's office market, with a development boom expected to keep a lid on rental growth.
Sydney, dogged for years by weak demand, is showing the most potential.
Commercial real estate agent Jones Lang LaSalle notes that in the past two months the mood in Sydney has changed and businesses are eager to lock in new leases. Greg Paramor, managing director of listed developer and investor Mirvac Group and former president of the Property Council of Australia, sees a commercial property sector that is in balance following the shake-out in the early 1990s when office property values plunged.
But, he says, finding property plays that will surge in value is increasingly difficult.
Paramor says the hotel market is moving into recovery barring unforeseen events such as bird flu or terrorist attacks.
But smaller sectors such as caravan parks and childcare centres have already had a run, Paramor notes.
In retail property, Paramor sounds a warning bell on bulky goods centres despite rising rents.
"There has been rapid expansion in the sector and there will be winners and losers. It will depend on the quality of the tenants."
Overall, retail property is close to top of the cycle after five years of exceptional retail sales growth.
Jones Lang LaSalle notes that real retail turnover growth averaged more than 6 per cent per annum for the three years to September 2004.
It was less than 3 per cent during most of last year, however this still seemingly defied the housing downturn and higher oil prices, says JLL manager, forecasting services, John Sears. Macquarie Bank's Cornish expects retail property returns will moderate from the exceptional growth of the past five years.
However, he believes one of the areas of opportunity will be food-based convenience centres, which tend to remain relatively unscathed by swings in discretionary spending.
The large listed shopping centre owners such as Westfield Group are also reasonably well insulated by the long nature of retail leases and stringent land zonings that restrict new greenfield shopping centre developments. These factors have made listed shopping centre owners Macquarie Developers Diversified and Westfield Group among UBS's recommended stocks.
The best pick in industrial property will be in areas around new transport hubs.
With state governments pouring money into road and infrastructure systems, whole new industrial investment areas are opening up.
Cornish notes some of the new areas for potential investment are around Melbourne's Eastlink, Brisbane's Gateway precinct and Sydney's Westlink M7.
Paramor, a seasoned investor, says the key is a balanced portfolio.
"You don't put all your eggs in one basket," he warns.
And he notes that people often pursue higher returns without evaluating the risk.
--------------------------------------------------------------------------------
STATE BY STATE
NSW
SYDNEY is the only residential market to have seen its housing bubble burst, rather than gently deflate.
Optimists like Ray White Real Estate chairman Brian White say this means there are buying opportunities and that of all the capital cities, Sydney has the most potential for growth.
Pessimists like investment bank JPMorgan argue there may be more strife to come and that it's a long, slow climb back.
The strongest sectors are likely to be inner and middle ring Sydney housing -- underpinned by the strong job market (NSW added 62,000 jobs in the past year, the strongest in 16 years) -- and NSW coastal property over the medium to longer term as the trend to coastal living continues unabated.
Last to recover will be Sydney investor apartments and some of the first-home-owner suburbs sensitive to interest-rate moves.
JP Morgan chief economist Stephen Walters points out NSW is still losing 33,000 people every year to other states, which will keep NSW property markets flat for some time.
Housing analyst Australian Property Monitors found Sydney house prices fell 1.5 per cent in the September quarter to $520,000, though more recent figures for the three months to the end of October by analyst Residex show a price rebound of 2.24 per cent.
Wizard Home Loans chairman Mark Bouris argues Sydney house prices are finally returning to more normal long-term growth.
"These figures show that we've reached the bottom and the market is turning," Bouris says.
In NSW, private investors continue to buy small office and retail property, though commercial auction clearance rates are down.
Yields, in a number of cases, are no more than the cash rate of 5.5 per cent.
A number of analysts are picking Sydney CBD office property, largely owned by listed property trusts, as the turn-around story of the next few years. The city's office towers recorded 24,000sqm of net leasing in the September quarter.
Although office vacancies rose to 11.2 per cent, prime rents grew by 4.6 per cent and reached $500/sqm for the first time since 2003, according to real estate agent Jones Lang LaSalle.
VICTORIA
STEADY is how the Victorian Real Estate Institute describes Melbourne's housing market two years on from the end of the housing boom.
At $360,000, the median house price has risen only 2.4 per cent in the past year, confirming a soft landing.
Transaction levels are up about 5 per cent on a year ago, with the REIV sticking to predictions of a 2 per cent house price rise for the 2005 calendar year.
Prices tapered off for the top end of housing during the September quarter, largely due to seasonal factors including fewer beachfront winter sales.
Nevertheless, quality houses in good locations are holding value in the current owner-occupied dominated market, with well-heeled suburbs recording the highest price growth over the past year.
The biggest mover was leafy Malvern East, where a 42.1 per cent rise has lifted the median house price from $540,000 to $767,500.
At the same time Burwood, Wheelers Hill and Williamstown all recorded rises above 20 per cent.
Hardest hit in the residential slowdown has been investor apartments with 2600 units due to be completed and settled by September 2006, around 1200 of these to be finished by Christmas.
A number of these are likely to go back on the market, further depressing Melbourne's inner-city apartment sector. Melbourne's CBD office market remains on the nose for investors concerned about high office vacancies.
The city has three of Australia's 10 biggest mooted office projects, which will add a total of 142,000sqm to CBD office stock.
By Melbourne standards, 2005 has been a poor year for retail property, with private investors staying away amid fears of a sector downturn.
It's also been a so-so year for industrial property, with stagnant rents and pockets of oversupply.
QUEENSLAND
THE rush of interstate migration which drove Queensland's housing boom has slowed.
In mid-2003, Queensland was drawing about 68,500 people a year, but the latest figures, in March, show an annual influx of 52,000 people.
Macquarie Bank's property research head Rod Cornish says that the 16,500 fewer people played a part in the cooling market.
Some parts of the Queensland apartment market have suffered oversupply, particularly inner Brisbane and the Sunshine Coast.
The Gold Coast is also undergoing a development boom with 104 apartment projects worth $11.6 billion planned or under construction, according to real estate agents PRDnationwide.
The population drift, combined with a strong resources sector, has underpinned all sectors of the Queensland property market.
Cornish expects demand to pick up slowly again next year, helping to absorb the rash of new developments.
After years of hefty incentives which ate into real rents, the Brisbane office market has finally seen a genuine upswing.
WESTERN AUSTRALIA
PERTH is in the midst of a mining and resources boom which is underpinning the local economy.
According to Australian Property Monitors, only two capital cities recorded house price increases in the September quarter: Darwin, up 7.9 per cent; and Perth, up 2.4 per cent to a median of $338,000.
Bunbury and Mandurah in the southwest corner of Western Australia are expected to be the nation's fastest-growing areas over the next three years, according to an Australian Local Government Association study.
Real Estate Institute of Western Australia Bunbury branch chairman John Saunders says property values in the town have grown 75 per cent in the past two years and further growth is expected.
The resources boom has created a burst of activity in Perth's office market, which recorded the highest level of capital-city leasing activity for the September quarter.
Some 33,000sqm of office space was taken up -- around 9000sqm more than Sydney and 7000sqm more than Melbourne.
Perth's office vacancy rate fell from 10.2 per cent to 7.6 per cent in the quarter, while rent grew by an outstanding 16.8 per cent, according to Jones Lang LaSalle.
SOUTH AUSTRALIA
A 1.1 per cent drop in Adelaide September quarter house prices was the first in five years.
With unsold cars piling up in their thousands at the Holden factory at Elizabeth in Adelaide's outer north, and the future of rival car maker Mitsubishi riding on the success of a new 380 model that has just hit the roads, car industry-reliant South Australians are holding their collective breath as the state comes off a three-year property boom that has helped drive the local economy.
Despite a September quarter price fall, Real Estate Institute of South Australia president Robin Turner believes the market remains stable and the prospect of a bad slump is unlikely.
"We're not expecting a big downturn as long as interest rates and petrol prices remain steady in coming months," he says.
Despite the September fall, Adelaide house prices have risen 3.8 per cent, from $262,000 to $272,000, in the past year.
Turner says the price fall was bound to happen as the market returned to sustainable levels after the boom, which for Adelaide only ended last year.
Beyond housing, the Adelaide CBD is in the middle of an office construction boom, while new commercial developments, mainly office-warehouses driven by private investors and small developers, have mushroomed across the suburbs.
Turi Condon and Maurice Dunlevy
With great focus on the price of property, experts are applying a hands-on approach, Turi Condon reports
November 26, 2005
TIME is ticking by. For the housing market it's past midnight and the worst is over. The residential markets of Sydney, Melbourne and Brisbane are stabilising, though this will take time.
In Perth, housing is hot, but it's not quite the witching hour.
Macquarie Bank has mapped the state of the nation's property markets on the face of a clock where midnight marks the peak of the cycle.
On the clock, residential investment property, mostly apartments, is well into the early hours of the morning or mid-downturn, the eastern seaboard capitals' housing markets are just about to see daylight, while the nation's office towers are in the early upswing of a sunny afternoon.
Retail property is approaching the top of the cycle around 11pm.
Australia's residential property markets peaked in the spring of 2003 and, apart from Western Australia, have seen two years of slowing sales and declining or stagnating prices.
Typically, sagging housing prices last for about 18 months, according to Macquarie Bank's head of property research Rod Cornish.
He expects a two- to three-year period when housing prices, particularly in Sydney and Melbourne, are stable.
"There will be some variation -- prices will rise for a couple of quarters, then there may be a couple of quarters of falls," he says.
Cornish says a bounce in housing finance tends to happen about nine months before house prices begin to recover.
The Reserve Bank of Australia's latest figures show housing loans to owner occupiers are rebounding, up 3.7 per cent by value in the September quarter.
For investment property, typically apartments, mortgage finance was up 2.1 per cent on a value basis.
"It will take time for investors to come back," Cornish notes.
Another indicator is the number of people walking through housing display villages, and that too is on the rise, according to Cornish.
One of the brighter spots in the long term will be lifestyle property.
Though coastal markets have come off the boil and prices are down, Cornish notes key areas have shown higher average annual price growth than capital cities over the past 10 years.
While Sydney's average annual house price increased 9.4 per cent, Palm Beach romped along at 15.5 per cent.
Brisbane's house prices rose 8.6 per cent a year while Noosa Heads grew 12.3 per cent.
Melbourne was up 9.6 per cent compared to Portsea's 11.6 per cent.
"There is no reason why this trend won't continue," says Cornish.
The housing market is still hampered by low affordability, but nowhere near the levels of the late 1980s when it took 60 per cent of the average wage to meet mortgage payments for a Sydney home.
Now it's 36 per cent.
Strong employment figures, the big bonus being paid and the healthy stock market have buoyed the top end of the market.
Macquarie Bank alone paid $1 billion of bonuses to its 6500 staff this year, with one analyst quipping that that in itself put a floor under Sydney's eastern suburbs and north shore home sales.
Tempering the outlook will be movements in interest rates and unemployment.
Unemployment is expected to edge up marginally from the current 5.2 per cent, but is unlikely to have much impact on the housing market compared with the downturn of the early 1990s when unemployment levels reached 11 per cent and interest rates hit 17 per cent, sending housing prices into freefall.
Earlier this month, the RBA warned that inflationary pressures could prompt a rise in rates from the current 5.5 per cent cash rate. Macquarie Bank predicts two interest rate rises totalling 0.5 per cent by mid-2006.
A consensus forecast from 21 economists suggests rates will remain unchanged at June next year.
Investment bank JP Morgan expects the status quo to persist all year but is one of the analysts sounding a note of caution, saying house prices still have further to fall in some areas.
Another pessimist is Aussie Home Loans managing director John Symond, who earlier this month warned that sectors of the market such as investment property and the first home buyers belt may have price falls of up to 10 per cent.
He argues that heavily mortgaged buyers will be at risk if interest rates do rise next year.
Given that the outlook is fairly benign, buyers don't believe housing prices will surge in a hurry and are not feeling under pressure to rush into the housing market.
"There's a lot of people sitting on the sidelines," Cornish says.
Ray White Real Estate chairman Brian White says that removing the vendor tax in NSW in August restored some confidence, not only affecting NSW but sending a ripple effect through other markets.
"The psychological impact has been very important," he says. "It's underpinning confidence for the next year." The residential markets are in equilibrium -- there are few areas of excess supply or demographic changes that haven't already been documented, says White.
"There are no big shifts on the horizon. One thing the markets like is a status quo."
The same applies to the commercial markets, where listed property trusts which own the bulk of big office buildings, warehouses and shopping centres have been "roaring their heads off", as White puts it.
Listed property trusts, which make up 10 per cent of the S&P/ASX 300 Index, have been dragged along by the strength of the equities market, but have also captured investors' attention with their solid returns.
Earlier this year, Russell Investment Group found listed property provided after-tax returns of between 10 per cent and 12.3 per cent a year, depending on the investor's tax bracket, in the decade to December 2004.
By comparison, Australian shares returned 9.2 per cent to 11.6 per cent a year.
Residential investment property returned 10.6 per cent over the same period.
While the returns won't match the stellar run of the last couple of years, investment bank UBS expects Australian listed property trusts to offer a total return of 8 to 9 per cent next year compared with a broader equities return of 8.5 per cent.
Underpinning this is the solid outlook for commercial property.
Analysts have questioned how much more yields for commercial property can come down, but head of Westpac Bank's property markets, Frank Allen, believes the weight of money flowing into superannuation will continue to drive capital growth.
This is most likely in the office market, which to date has been the weakest of the sectors because of soft demand from tenants.
On Macquarie Bank's property clock most of Australia's office markets fall into the early upswing phase.
Brisbane's office market sits in the strongest position, with Cornish noting that the city's office rents have risen 38 per cent since 2002. Perth, driven by the resources boom, follows.
Question marks still hang over Melbourne's office market, with a development boom expected to keep a lid on rental growth.
Sydney, dogged for years by weak demand, is showing the most potential.
Commercial real estate agent Jones Lang LaSalle notes that in the past two months the mood in Sydney has changed and businesses are eager to lock in new leases. Greg Paramor, managing director of listed developer and investor Mirvac Group and former president of the Property Council of Australia, sees a commercial property sector that is in balance following the shake-out in the early 1990s when office property values plunged.
But, he says, finding property plays that will surge in value is increasingly difficult.
Paramor says the hotel market is moving into recovery barring unforeseen events such as bird flu or terrorist attacks.
But smaller sectors such as caravan parks and childcare centres have already had a run, Paramor notes.
In retail property, Paramor sounds a warning bell on bulky goods centres despite rising rents.
"There has been rapid expansion in the sector and there will be winners and losers. It will depend on the quality of the tenants."
Overall, retail property is close to top of the cycle after five years of exceptional retail sales growth.
Jones Lang LaSalle notes that real retail turnover growth averaged more than 6 per cent per annum for the three years to September 2004.
It was less than 3 per cent during most of last year, however this still seemingly defied the housing downturn and higher oil prices, says JLL manager, forecasting services, John Sears. Macquarie Bank's Cornish expects retail property returns will moderate from the exceptional growth of the past five years.
However, he believes one of the areas of opportunity will be food-based convenience centres, which tend to remain relatively unscathed by swings in discretionary spending.
The large listed shopping centre owners such as Westfield Group are also reasonably well insulated by the long nature of retail leases and stringent land zonings that restrict new greenfield shopping centre developments. These factors have made listed shopping centre owners Macquarie Developers Diversified and Westfield Group among UBS's recommended stocks.
The best pick in industrial property will be in areas around new transport hubs.
With state governments pouring money into road and infrastructure systems, whole new industrial investment areas are opening up.
Cornish notes some of the new areas for potential investment are around Melbourne's Eastlink, Brisbane's Gateway precinct and Sydney's Westlink M7.
Paramor, a seasoned investor, says the key is a balanced portfolio.
"You don't put all your eggs in one basket," he warns.
And he notes that people often pursue higher returns without evaluating the risk.
--------------------------------------------------------------------------------
STATE BY STATE
NSW
SYDNEY is the only residential market to have seen its housing bubble burst, rather than gently deflate.
Optimists like Ray White Real Estate chairman Brian White say this means there are buying opportunities and that of all the capital cities, Sydney has the most potential for growth.
Pessimists like investment bank JPMorgan argue there may be more strife to come and that it's a long, slow climb back.
The strongest sectors are likely to be inner and middle ring Sydney housing -- underpinned by the strong job market (NSW added 62,000 jobs in the past year, the strongest in 16 years) -- and NSW coastal property over the medium to longer term as the trend to coastal living continues unabated.
Last to recover will be Sydney investor apartments and some of the first-home-owner suburbs sensitive to interest-rate moves.
JP Morgan chief economist Stephen Walters points out NSW is still losing 33,000 people every year to other states, which will keep NSW property markets flat for some time.
Housing analyst Australian Property Monitors found Sydney house prices fell 1.5 per cent in the September quarter to $520,000, though more recent figures for the three months to the end of October by analyst Residex show a price rebound of 2.24 per cent.
Wizard Home Loans chairman Mark Bouris argues Sydney house prices are finally returning to more normal long-term growth.
"These figures show that we've reached the bottom and the market is turning," Bouris says.
In NSW, private investors continue to buy small office and retail property, though commercial auction clearance rates are down.
Yields, in a number of cases, are no more than the cash rate of 5.5 per cent.
A number of analysts are picking Sydney CBD office property, largely owned by listed property trusts, as the turn-around story of the next few years. The city's office towers recorded 24,000sqm of net leasing in the September quarter.
Although office vacancies rose to 11.2 per cent, prime rents grew by 4.6 per cent and reached $500/sqm for the first time since 2003, according to real estate agent Jones Lang LaSalle.
VICTORIA
STEADY is how the Victorian Real Estate Institute describes Melbourne's housing market two years on from the end of the housing boom.
At $360,000, the median house price has risen only 2.4 per cent in the past year, confirming a soft landing.
Transaction levels are up about 5 per cent on a year ago, with the REIV sticking to predictions of a 2 per cent house price rise for the 2005 calendar year.
Prices tapered off for the top end of housing during the September quarter, largely due to seasonal factors including fewer beachfront winter sales.
Nevertheless, quality houses in good locations are holding value in the current owner-occupied dominated market, with well-heeled suburbs recording the highest price growth over the past year.
The biggest mover was leafy Malvern East, where a 42.1 per cent rise has lifted the median house price from $540,000 to $767,500.
At the same time Burwood, Wheelers Hill and Williamstown all recorded rises above 20 per cent.
Hardest hit in the residential slowdown has been investor apartments with 2600 units due to be completed and settled by September 2006, around 1200 of these to be finished by Christmas.
A number of these are likely to go back on the market, further depressing Melbourne's inner-city apartment sector. Melbourne's CBD office market remains on the nose for investors concerned about high office vacancies.
The city has three of Australia's 10 biggest mooted office projects, which will add a total of 142,000sqm to CBD office stock.
By Melbourne standards, 2005 has been a poor year for retail property, with private investors staying away amid fears of a sector downturn.
It's also been a so-so year for industrial property, with stagnant rents and pockets of oversupply.
QUEENSLAND
THE rush of interstate migration which drove Queensland's housing boom has slowed.
In mid-2003, Queensland was drawing about 68,500 people a year, but the latest figures, in March, show an annual influx of 52,000 people.
Macquarie Bank's property research head Rod Cornish says that the 16,500 fewer people played a part in the cooling market.
Some parts of the Queensland apartment market have suffered oversupply, particularly inner Brisbane and the Sunshine Coast.
The Gold Coast is also undergoing a development boom with 104 apartment projects worth $11.6 billion planned or under construction, according to real estate agents PRDnationwide.
The population drift, combined with a strong resources sector, has underpinned all sectors of the Queensland property market.
Cornish expects demand to pick up slowly again next year, helping to absorb the rash of new developments.
After years of hefty incentives which ate into real rents, the Brisbane office market has finally seen a genuine upswing.
WESTERN AUSTRALIA
PERTH is in the midst of a mining and resources boom which is underpinning the local economy.
According to Australian Property Monitors, only two capital cities recorded house price increases in the September quarter: Darwin, up 7.9 per cent; and Perth, up 2.4 per cent to a median of $338,000.
Bunbury and Mandurah in the southwest corner of Western Australia are expected to be the nation's fastest-growing areas over the next three years, according to an Australian Local Government Association study.
Real Estate Institute of Western Australia Bunbury branch chairman John Saunders says property values in the town have grown 75 per cent in the past two years and further growth is expected.
The resources boom has created a burst of activity in Perth's office market, which recorded the highest level of capital-city leasing activity for the September quarter.
Some 33,000sqm of office space was taken up -- around 9000sqm more than Sydney and 7000sqm more than Melbourne.
Perth's office vacancy rate fell from 10.2 per cent to 7.6 per cent in the quarter, while rent grew by an outstanding 16.8 per cent, according to Jones Lang LaSalle.
SOUTH AUSTRALIA
A 1.1 per cent drop in Adelaide September quarter house prices was the first in five years.
With unsold cars piling up in their thousands at the Holden factory at Elizabeth in Adelaide's outer north, and the future of rival car maker Mitsubishi riding on the success of a new 380 model that has just hit the roads, car industry-reliant South Australians are holding their collective breath as the state comes off a three-year property boom that has helped drive the local economy.
Despite a September quarter price fall, Real Estate Institute of South Australia president Robin Turner believes the market remains stable and the prospect of a bad slump is unlikely.
"We're not expecting a big downturn as long as interest rates and petrol prices remain steady in coming months," he says.
Despite the September fall, Adelaide house prices have risen 3.8 per cent, from $262,000 to $272,000, in the past year.
Turner says the price fall was bound to happen as the market returned to sustainable levels after the boom, which for Adelaide only ended last year.
Beyond housing, the Adelaide CBD is in the middle of an office construction boom, while new commercial developments, mainly office-warehouses driven by private investors and small developers, have mushroomed across the suburbs.
Turi Condon and Maurice Dunlevy
