By Katrina Nicholas - Aug 25, 2010 12:01 AM GMT+0800

Bloomberg

Singapore bond sales are accelerating as companies on an island vying for the title of world’s fastest-growing economy.

Temasek Holdings Pte. and CapitaLand Ltd. led borrowers that raised $14.1 billion this year, topping the record $13.2 billion of notes sold in 2001, according to data compiled by Bloomberg. The benchmark three-month interbank lending rate was last at 0.54889 percent, the lowest since 1987, when data on the Monetary Authority of Singapore’s website starts.

“Singapore is going through an outstanding period of economic growth with most sectors performing well,” Aaron Russell-Davison, head of Asia debt syndicate at Standard Chartered Plc, said in a phone interview from the city-state. “In this context it makes sense that companies are looking to borrow longer-dated money at historically attractive levels.”

The economy of Singapore, Asia’s second-smallest country after the Maldives, may be the world’s fastest-growing in 2010 after ballooning demand for goods and services prompted the government to raise forecasts three times since January. Gross domestic product increased 17.9 percent in the first half, ahead of the trade and industry ministry’s full-year prediction of between 13 percent and 15 percent and surpassing India’s expectations of 8.5 percent growth and China’s of 9.5 percent.

Leisure Visitors

Companies added about 63,000 jobs in the six months to June 30, according to the Ministry of Manpower, a year after Singapore exited its worst recession since independence in 1965. Monthly tourist arrivals exceeded 1 million for the first time in July after Las Vegas Sands Corp. and Genting Singapore Plc opened the city’s first casino resorts.

Property developers, shopping mall operators and hoteliers accounted for 26 percent of Singapore’s 113 bond issues this year, Bloomberg data show.

CapitaLand, Southeast Asia’s biggest developer, sold S$1.25 billion ($917 million) of bonds this month in maturities ranging from four to 10 years. The company paid a 4.3 percent coupon when it sold S$350 million of 10-year bonds at par on Aug. 17 compared with 4.4 percent when it sold S$100 million of eight- year notes in 2003, the data show.

“Our approach has been to grow the orchard not squeeze the orange,” said Olivier Lim, CapitaLand’s chief financial officer. We “nurture the group’s access to markets and raise money when markets are conducive, not when we need the funds.”

Lower Coupons

Temasek is Singapore’s most prolific borrower this year after it issued notes in British pounds and Singapore dollars with maturities of between 10 and 40 years, according to Bloomberg data. The state-owned investment company is paying a 4.2 percent coupon for its 40-year notes, 10 basis points less than the 4.3 percent it paid for 10-year money in 2009.

Temasek sells bonds “as public markers of our credit quality,” spokesman Jeffrey Fang said in an e-mailed response to questions. As well as improving capital efficiency and funding flexibility, they “foster the discipline of engaging with both international and Singapore bondholders,” he said.

“With reasonable growth coming back into Asia, locking in a low coupon for the next 10 years is a pretty smart thing to do,” said Sean Henderson, Hong Kong-based head of Asia debt syndication for HSBC Holdings Plc, the No. 3 arranger of Singapore bond sales this year. “Singapore borrowers tend to be rare and very high quality names, so investors have been comfortable about extending durations in order to get a bit of extra yield.”

Smaller Sales

When Singapore’s AAA rated Housing & Development Board sold S$500 million of three-year bonds in July it paid a 1.15 percent coupon, according to Bloomberg data. No Singapore borrower has paid more than 7.5 percent this year, the data show.

Olam International Ltd., the Singapore-based commodities trader, paid 7.5 percent this month when it sold $250 million of 10-year bonds, its longest-maturity notes. The bonds traded at 101.13 cents on the dollar to yield 7.338 percent yesterday, according to Royal Bank of Scotland Group Plc prices. Olam declined to comment in an e-mailed response to questions.

While companies can typically borrow larger sums in the U.S. dollar bond market, according to HSBC’s Henderson, they pay slightly less to sell bonds in Singapore. Companies completed 35 U.S. dollar-denominated sales that raised $500 million or more in Asia excluding Japan this year compared to nine corporate sales of at least S$500 million.

Interbank Costs

The Singapore interbank offered rate that banks charge each other to borrow U.S. dollars was last at 0.31944 percent, its lowest in at least 23 years. The rate rose to as much as 5.7775 percent during the global financial crisis as banks hoarded capital after the collapse of Lehman Brothers Holdings Inc.

Borrowers sold $2.5 billion of bonds in the city in 1999 and issuance ranged between about $5 billion and $7 billion a year for much of the last decade, Bloomberg data show.

“The regulators in Singapore have been working hard to make this market appealing to both investors and issuers,” said Clifford Lee, head of fixed-income for DBS Group Holdings Ltd., the top-ranked underwriter of Singapore dollar bond sales. “There’s no withholding tax and the approval process for foreigners to sell bonds is simple and quick if it’s just an offering to accredited investors,” he said.

VTB Group, Russia’s second-largest bank, raised S$400 million from two-year notes this month. It was the only Russian issuer to target Asian investors apart from Moscow-based gas company OAO Gazprom, which sold yen-denominated bonds in 2007.

Agricultural Bank of China Ltd., China’s biggest lender by customers, sold $50 million of floating-rate notes through its Singapore unit in April. The lender has offices in the city- state as well as in Hong Kong, London, Tokyo, Seoul, Frankfurt, Sydney and New York, according to itswebsite.

“We are seeing an increased maturity and sophistication in the Singapore capital markets,” Standard Chartered’s Russell- Davison said. “2010 is set to be a big year, reflecting the confidence of both issuers and investors.”

conomy exploit the lowest funding costs in at least two decades to finance expansion.

Bloomberg
25 June 2010

The yuan had its biggest weekly gain since December 2008 after China set the currency’s daily reference rate at a record high, allowing appreciation before the Group of 20 meeting tomorrow.

The People’s Bank of China said June 19 it would end a two- year peg to the dollar and manage the yuan with reference to a basket of currencies, noting that the European Union is the nation’s biggest trading partner. The currency closed at its strongest level since 1993, a day before President Hu Jintao attends the G-20 summit in Toronto tomorrow.

“President Hu can point to it as evidence that China is serious about making its currency more flexible,” said Brian Jackson, a senior emerging-markets strategist for the Royal Bank of Canada in Hong Kong. “But the rest of the G-20 were not born yesterday, and there may be some suspicion that the move over the last week was just window-dressing.”

The yuan rose 0.5 percent this week, and 0.1 percent from yesterday, to 6.79 per dollar as of 5:51 p.m. in Hong Kong. The central bank fixed the reference rate at 6.7896 per dollar, 0.3 percent stronger than yesterday and 0.15 percent higher than the close in the spot market. The yuan is allowed to trade 0.5 percent on either side of the daily fixing.

Unfair Advantage

The euro dropped 0.1 percent, after rallying 0.5 percent against the greenback in the previous two days. The central bank noted over the weekend that 16.3 percent of China’s trading volume is with the EU, compared with 12.9 percent for the U.S.

“The yuan rate is more closely linked with a basket of currencies, especially the euro,” said Liu Xin, a currency analyst at the Hong Kong branch of Bank of Communications Ltd., China’s fifth-biggest lender. “The yuan tends to be moved by the relative strength of the euro versus the dollar.”

President Barack Obama said it is too soon to say whether China’s decision to allow more flexibility for its currency will be sufficient to rebalance the world economy. Obama and Hu are scheduled to have a bilateral meeting June 26 while at the summit.

“The initial signs were positive but it’s too early to tell,” Obama said at a joint news conference with Russian President Dmitry Medvedev at the White House yesterday.

The yuan’s dollar peg had provided China with an “unfair trade advantage,” and the U.S. has told the Chinese government “we expect change,” Obama said. He said his administration “did not expect a complete 20 percent appreciation” because that would be damaging to the world economy.

Sanctions Threat

The U.S. trade deficit with China reached $71 billion for the first four months of the year, up 5.8 percent from the same period of 2009, according to U.S. government data. Senator Charles Schumer, a Democrat from New York, said he will seek a vote soon on legislation to let U.S. companies seek tariffs on Chinese imports to help offset the weak yuan.

Chinese Foreign Ministry spokesman Qin Gang told reporters in Beijing yesterday that a revalued yuan won’t solve U.S. economic woes.

“The appreciation of the yuan cannot bring balanced trade,” Qin said. A strengthening yuan “cannot help to solve U.S. problems of unemployment, overconsumption and low savings rate.”

China’s benchmark money-market rate rose to near the highest level this year as bets that the yuan’s appreciation will be modest spurred speculation funds will flow abroad. The 12-month non-deliverable forward contract was pricing in a 1.7 percent currency gain in 12 months.

‘Limited Appreciation’

The seven-day repurchase rate, which measures funding availability between banks, surged 29 basis points today to 3.16 percent, extending this week’s gain to 47 basis points, according to the daily fixing rate published by the National Interbank Funding Center. The rate reached this year’s high of 3.28 percent on June 2. A basis point is 0.01 percentage point.

“The market expects limited yuan appreciation and more funds will flow out of the country than are coming in,” said Pang Aihua, a Beijing-based fixed-income analyst at China Citic Bank.

Government bonds were little changed. The yield on the 1.77 percent note due in December 2013 was 2.64 percent, and the price of the security was 97.14 per 100 yuan face amount, according to the funding center.

–Belinda Cao, Frances Yoon. Editors: Sandy Hendry, James Regan

Market Wrap with John Edwards, 
CEO of Residex and FindMeaHome.com.au

Basically the news is good. I continue to hope that the RBA will refrain from further interest rate increases for the present. As far as the housing market is concerned it looks as if they have done their job. Our markets are now slowing in a very orderly fashion and the risk of a “bubble” has abated.

In this news letter I will concentrate on Melbourne as it has been the most overheated market and did present the highest level of risk. Before moving to this topic let’s look at all markets. The table below presents the position.

The results provided above are not subject to any future revision. Residex has developed technology which allows it to release statistics on the performance of the markets with proven high levels of accuracy with lower levels of data than is required for hedonic and stratified median results. This means Residex is able to release accurate results earlier than any other party in the market. The Residex method is unique and while it is based on a repeat sales technology it is not the usual method and therefore avoids the inherent problems in generally accepted hedonic, repeat sales and stratified median methods.

The most important fact presenting from the data is the increasing rental rates. Melbourne is the only house market where there is no rent rise. This points to the fact that the buying constraints have kicked in and demand for rental stock is again starting to rise. This will now be a trend for a considerable period of time.

The interest rate increases, I think can now be said to have been largely absorbed and those who were going to be excessively stressed from the first group of increases have probably largely exited the market or will do so very shortly. I suggest this as the number of Suburbs falling in value due to excess sale stock, where mortgage stress would be seen (those in the lower cost areas) are less than at the peak. The first wave peaked in February and since then it has been reducing. The impact of the next group of interest rate increases is starting to flow through. This will result in some moderate increases in Suburbs moving to negative growth. Melbourne is likely to be the most impacted as it returns to a more normal growth pattern and the last group of interest rate increases flows through to cause those who were stressed but just making it to sell. There is about a three to four month lag in the impact of rate increases as can be seen in Graph 1 – Average % of Capital City Suburbs below the Median Value adjusting in Value, where we look at rate increases and volume of Suburbs falling in value.

Melbourne remains the only capital city where for house and land values there are no Suburbs which are falling in value. For the first time in Melbourne in a considerable period there are Suburbs in the lower cost areas where unit values are falling.

In the last three years Melbourne houses have increased by 42% and this translates into an increase in wealth for the average Melbournian of $172,000. In the unit market there has been an equal increase in percentage terms and in dollar terms it has amounted to $132,000.

The rate of growth was very steep and was a cause of concern as when these types of increases occur and are brought to a close by robustly increasing interest rates there is a significant chance of a “bubble bust” as there is a tendency for people to pay excessive amounts for properties at the top of the market and get caught on a “cash flow tight rope” and be forced to sell at a loss at an inopportune time. The aggressive stand made by the RBA in so quickly increasing interest rates was a potential hazard for this market.

There remains, albeit a much lower risk now, that this market will get into trouble. If it does it is likely to be the only market in Australia that will. The more moderate increases in other markets and their more moderated progressive corrections over the last few months have left them in good shape.

In Graph 2 Australia vs Melbourne, I compare the Melbourne house and land market to the Australian market as a whole. The trend lines paint the picture.

The peak of the general housing market Australia wide occurred in about June 2009 while the peak of the Melbourne housing market was only reached in April 2010. Its downturn was caused by the RBA’s actions on the interest rate front. Having said all of this, we should keep the knowledge in perspective as Melbourne is generally doing better than any other capital city. Immigration is high, business and consumer confidence seems to be high also and why not when the population has seen such significant increases in its wealth. Additionally, the State Government is one of the few that seem to have things under control. The state is clearly far better managed than say Qld. Melbourne is home to the some very significant corporate entities, CSL, BHP, ANZ, NAB, Telstra and Rio-Tinto to just name a few. These entities as employment increases generally and immigration continues will maintain the demand for housing stock and ensure a limited correction impact.

I have in recent news letters been advising against Melbourne investment as I could see the above unfolding. So what will be the long terms outcome here?

Our models are telling us that Melbourne like Sydney, about a decade ago, has arrived at the point of limited affordability. This causes house price growth to stagnate and grow at something slightly better than inflation and in some areas of the city to fall in real terms. Our models also tell us that rental costs will increase. There will be areas of the city that will do well. These areas will be the Suburbs that are well positioned close to the city and currently have a median value at close to or slightly less than the city median. Units that are older style and again well positioned will also do well.

If you didn’t purchase in Melbourne a year or two ago, in a few months time, it will be time to go bargain hunting for these types of properties.

While we are discussing predicted futures may I conclude by indicating that the NSW State Government seems to at last be getting its act together and our models continue to indicate that well positioned property in this state is the best buy.

The June Edition of the Best Rent has just been released and that report points to the fact that rentals are increasing, NSW presents a significant number of opportunities and the way for the future, is a portfolio of balanced return properties. That is, properties that present moderate to good capital growth with quality rental returns. This approach in an increasing interest rate environment with some global economic risks still on the horizon, is undoubtedly the most attractive low risk path.

The Robyn Boyd award for residential house architecture … Freshwater House, Harbord, NSW, designed by Chenchow Little Architects.

Light and breezy … The Robyn Boyd award for residential architecture went to Freshwater House, Harbord, NSW, designed by Chenchow Little Architects.

National architecture award for residential architecture … Zac’s House, Sorrento, Victoria, designed by Neeson Murcutt Architects.

National architecture award for residential house architecture … Whale Beach House, Whale Beach, NSW, designed by Neeson Murcutt Architects.

National commendation for residential house architecture … Arm End House, Opossum Bay, TAS, designed by Stuart Tanner Architects.

The Harry Seidler award for commercial architecture … The ivy hotel, Sydney, NSW, designed by Woods Bagot in collaboration with Merivale Group and Hecker Phelan and Guthrie.

National award for commercial architecture … Bendigo Bank headquarters, Bendigo, VIC, designed by BVN Architecture and Gray Puksand. It also received a commendation for sustainable architecture.

Click here to view the entire Photo Gallery from theage.com.au

The Age

JASON DOWLING
May 7, 2010

PREMIER John Brumby has acknowledged for the first time that Victoria’s population has been growing too fast.

While not quite echoing the famous ”Sydney is full” sentiments of former New South Wales premier Bob Carr, Mr Brumby said he was comfortable with a population growth rate of up to 1.7 per cent, which he likened to a car travelling at 100km/h.

Victoria’s population growth under Mr Brumby’s definition has been ”speeding” at 130km/h. Budget papers show Victoria grew by 2.2 per cent last financial year, and is forecast to grow this financial year by 2.1 per cent and next financial year by 1.9 per cent. It is not until 2012-13 that growth is expected to return to the 1.7 per cent rate Mr Brumby says is appropriate.

”If you look at the budget projections, our population growth this year is 2.2 per cent, which is the highest in a long, long time,” Mr Brumby told a Melbourne Press Club lunch this week.

”We will add about 100,000 people. We may add more people this year than Queensland, that remains to be seen; we almost did last year.

”I was asked 18 months ago about our rate of population growth. I think at the time we were growing at about 1.6, 1.7 per cent and I said that was about right. I made a car analogy that we were sitting on 100km/h and that was fast enough.”

Mr Brumby said the state was growing faster ”because immigration is higher and because Victoria is a very popular place to be and our fertility rate is higher.

”But you will see we are making some assumptions about slightly lower rates of immigration in the future, a levelling off in terms of growth in fertility rates, so growth in population of 1.6, 1.7 per cent is a good, long-term, sustainable rate for us.”

Mr Brumby said it was important Victoria and Australia maintained population growth to deal with an ageing population.

”When all of the baby boomers go through, for every seven baby boomers there will just be two people who are productive in the community,” he said.

His comments came as a survey by research company TNS suggested many Victorians were concerned about how growth would affect their neighbourhood.

The survey of 246 Victorians, conducted in March, found although they believed overall that population growth was good for their region, many were concerned about the impact of growth on communities, including on traffic, housing affordability, water supply and green space.

TNS senior consultant in social research Robyn Rutley said people accepted population growth as a reality, but many stayed fearful of its impact.

”The way they get around, the way they live, their community spaces, their sense of community, etc,” she said. ”There is very much a ‘not in my backyard’ mentality around this issue.”

BHP wins 100pc price rise for iron ore Sarah-Jane Tasker

From: The Australian March 31, 2010 12:00AM

BHP Billiton has secured close to a 100 per cent jump in iron ore prices and convinced the major Chinese steel mills to accept short-term pricing in a groundbreaking move that kills off the controversial annual benchmark system.
The world’s largest miner yesterday took a significant step in chief executive Marius Kloppers’ campaign to introduce short-term pricing, by moving the majority of its contracts with Asian customers to a quarterly system — the first change in 40 years.

Macquarie analyst Brendan Harris described the announcement as a “momentous day” for the major. “It’s not every day that the pricing terms for one of the core commodities in world trade change,” he said.

“BHP Billiton’s announcement suggests that we are unequivocally in a transitional phase, which sounds the death knell of the old benchmark system.” BHP did not disclose the prices achieved, but analysts said it was likely to represent a 100 per cent increase on last year’s benchmark of about $US65 a tonne.

BHP, which argues that short-term pricing is fairer and more transparent, said the agreements represented the majority of its iron ore sales volumes.

“The structural change that these settlements represent is consistent with BHP Billiton achieving market clearing prices,” the company said in a statement.

BHP’s announcement came as it was reported that major competitor Vale, which recently joined the campaign to push for market prices, negotiated a 90 per cent rise in iron ore prices for the April to June period with major Japanese steelmakers Nippon Steel and Sumitomo Metal Industries. Nippon Steel and South Korean steelmaker Posco, which jointly purchase iron ore, have reached a provisional agreement with the Brazilian miner on a 90 per cent price rise from a year earlier to about $US110 a tonne.

Rio Tinto has yet to confirm any iron ore contracts this year, but indicated it was open to a move to shorter-term pricing.

The BHP contracts will also deliver a windfall for the Australian economy, which will benefit from the $40 billion-plus that iron ore exports generate annually. BHP said its agreements were on a “landed price equivalent basis”, which means it would have a competitive advantage over Vale because of the shorter distance to market for its ore. Merrill Lynch analyst Peter O’Connor said “landed” price should deliver BHP a windfall of about $US17 a tonne more than it does Vale.

“Clearly, BHP is flagging that the freight differential — long debated by Australia and Brazil — has been captured by the Australians,” he said in a report. “The quantum of difference in terms of equivalent price is significant. In contrast to Vale’s reported $US105-$US110/t price, BHP should gain an additional $US17/t (average freight differential in Q1), hiking Australian price expectations for the June quarter to around $US120 a tonne.

“This would be a gain of almost 100 per cent compared to the prevailing (outdated) contract price.”

Iron ore talks collapsed last year, with the Chinese holding out for 50 per cent price cuts, while the three mining giants, BHP, Rio, Vale, agreeing on a 33 per cent cut with their Japanese and Korean customers. “China has not got it right on iron ore negotiations,” an industry insider said.

The drama surrounding iron ore negotiations was highlighted by the case of Rio’s Stern Hu and three of his colleagues, who received jail sentences on Monday on charges of bribery and stealing commercial secrets relating to the annual talks.

Despite short-term contracts being accepted by most of BHP’s Chinese customers, Industry and Information Technology Ministry official Jia Yinsong reportedly said yesterday that China still supported benchmark pricing.

Increase Text Size
Decrease Text Size

The Age
March 25, 2010

t’s official: 60 per cent of investors believe Australia has a property bubble. A confluence of housing shortages, low interest rates, speculative fervour and last year’s move by the Rudd Government to relax foreign ownership rules on real estate have turbo-charged house prices.

But as John Maynard Keynes famously said: “A market can stay irrational longer than you can stay solvent,” and those looking for an imminent correction will find little evidence for it in investor attitudes.

In the latest Investor Pulse survey, conducted jointly by BusinessDay and marketing research group Colmar Brunton, there is no indication that investor appetite for property will slow down soon.

When asked if it was a good time to buy an investment property, 67 per cent agreed that it was because the supply shortage would support rental and price yields. Another 21 per cent thought prices would stagnate and only 12 per cent believed that prices would fall.

On the future of the boom, 32 per cent could see it running another year, 44 per cent for two or more years, and 7 per cent forever. Contrary to recent years, respondents ranked Sydney as the strongest property market in the current cycle, followed by Melbourne, Brisbane, Perth, Adelaide, Canberra, Darwin and Hobart.

This is all scary stuff. Investors played a key role in expanding the property bubble through the late 90s. In 1990 investment loans represented 16 per cent of Australian mortgages at $13 billion. By 2008 that figure had ballooned 2400 per cent to $310 billion, or 31 per cent of total mortgages. Investor attitudes matter.

Despite 71 per cent of investors hypothetically believing there could be a property crash, the more common attitude is that other factors will keep the momentum going. They rank the following factors in order of importance: housing shortages; low interest rates; foreign purchases of Australian property; speculative fervour; negative gearing and moral hazard.

The survey revealed, however, that moral hazard may be much larger than investors themselves admit, with 42 per cent expecting the Rudd Government to introduce another round of first home buyer grants if the current boom shows signs of ending.

The increase in foreign purchases also cannot be under estimated, following the decision last March by the federal government to relax its rules on property ownership. This abolished mandatory reporting of such acquisitions in a bid to ”enhance flexibility in the market”.

Before the change, foreign investment in Australian residential property had already started increasing, up 33 per cent to $20.4 billion. It is not known what the figures stand at in 2010 but there are suggestions that more than 30 per cent of homes auctioned are purchased by foreign speculators. If this is the case, it will dramatically add to the property bubble.

It is a potential political time bomb. Numerous readers have written in complaining that they are being priced out of the market by overseas bidders.

One Investor Pulse reader wrote recently: “It would explain the highly overpriced market and the reason why local wages are not enough to purchase the average house. To rely on high immigration to keep the economy temporarily out of trouble is one thing, but allowing this foreign speculation to keep Australians out of their own market should be opposed with urgency.”

Another Investor Pulse reader wrote: “So much for Rudd’s ‘working families’. Australians should get priority over foreign investors for what limited housing we have. How can Australians compete when Chinese borrow at home at 1 per cent? The Australian property market is strong and doesn’t need to be propped up. The Government should act now to stop this misguided and UN-Australian policy. Shame on you, Mr Rudd, for selling out on Working Families.”

Investors are divided on possible solutions to the outsized price rises. A majority, 54 per cent, are against interest rate rises. When it comes to government policy, investors ranked cutting stamp duty as their best solution, just ahead of building more public housing and re-limiting foreign investment.

Cutting immigration and negative gearing ranked lower. Another solution was also clear in the fact that 52 per cent of investors admitted they would reconsider the value of an investment property if the government reversed the 1999 capital gains tax cuts.

Investors clearly acknowledged the need for government intervention with 91 per cent seeing no solution coming from the private sector. Half reckoned banks will not lend to developers because their exposure to mortgages is already too high. Most of the other half agreed rather with the statement that the banks see the risk in overvalued prices and want to keep the market tight.

There was little sympathy for younger Australians with 55 per cent of investors agreeing first-home buyers were best off saving a deposit to get into the property market and 24 per cent suggesting the young could buy on the city fringe.

Another 27 per cent of surveyed investors already owned an investment property and 16 per cent were are seriously considering buying one.

aferguson@fairfax.com.au

The Age

Buyers more than a match for year’s first real test
February 21, 2010

YESTERDAY saw the first big influx of stock for the year and buyers proved more than up to the task. The Real Estate Institute of Victoria reported a clearance rate of 85 per cent, despite the number of properties up for auction swelling to 678.

The result should ease any lingering doubts that confidence in Melbourne’s property market was due to take a hit after the interest rate rose three times late last year.

Enough time has now passed to see the rises filter through to sentiment, and it’s pretty clear that buyers are as willing and able to jump into the market as they were at the end of 2009.

This week Residex reported that Melbourne house values dropped by 0.78 per cent in January, but the group cautions that slides are common when the market slows over Christmas and the early new year.

Interestingly, the unit market suffered no such problem, with values surging 2.38 per cent over the month.

”What we could be seeing is that buyers, particularly investors, are recognising that affordability is now more in the unit market than in houses,” Residex chief executive John Edwards said.

It is likely to take until the end of February or even March to figure out whether the house price dip is just seasonal volatility or a sign of things to come.

But, as we wait for confirmation, it is worth noting that since the auction market restarted in late January, agents and buyers’ advocates have routinely reported sale prices on houses and units that have smashed reserves.

Yesterday was no exception. In Richmond, a two-bedroom apartment in the converted warehouse at 5/29 Gipps Street sold for $851,000 off a reserve of $600,000. Biggin & Scott said the basement unit, which had no off-street parking, attracted eight bidders.

Investors dominated the auction of 2/39 Morrah Street in Parkville, a two-bedroom art deco apartment that opened on a genuine bid that was already $70,000 above its reserve. The property attracted five bidders and sold for $676,000 – or 41 per cent above its reserve.

”We’ve certainly seen the opening of the market this year really bring the investors out,” Thomson agent Jason Sharpe said. ”The [apartment] was ideal for a first home buyer, but investors seem to have a little more gas in the tank.”

An intense, five-way competition broke out over the freestanding Edwardian at 72 Bent Street in Northcote, which was declared on the market at $790,000. Keyhole Property Investments reported that by the time it was over, the price for the four-bedroom house had skyrocketed to $902,000.

In Watsonia, five bidders were responsible for ensuring the three-bedroom weatherboard house at 12 Linacre Street easily hit its reserve of $485,000 to sell for $608,000 through Buckingham & Company.

Eight bidders pushed the price of 9 Carlyle Street in Hawthorn East well past its $1.2 million reserve to a sale at $1,555,000. Fletchers said the three-bedroom 1920s villa, billed as a potential development opportunity, was on a 642-square-metre block.

The highest price result reported to The Sunday Age yesterday was for 14 Scotsburn Grove in Toorak, a six-bedroom house that Kay & Burton sold for $7 million after declaring it on the market at $6.8 million.

Elsewhere at the top end, Jellis Craig’s auction of 10 Talbot Avenue in Balwyn opened right on the $2 million reserve and six bidders took the four-bedroom house up to a final sale price of $2,615,000.

”It’s a great market if you’re selling, but it’s a pretty tough gig if you’re a buyer,” Jellis Craig director Scott Patterson said. ”A lot of people who couldn’t find a place last year are still in the market, and they’ve been joined by a fresh batch of buyers (in the new year).”

More than 970 auctions are scheduled for next weekend.

PHILIP HOPKINS
February 3, 2010

The Age

TENANTS are facing a shortage of office space in Melbourne’s CBD, with the vacancy rate forecast to plummet to just 5.3 per cent by the middle of next year. Docklands will be a key location for new buildings and rents are set to rise.

Knight Frank leasing director Mark Rasmussen said all new city stock being built this year had been tenanted, and most of the space vacated by tenants moving to new premises had either been leased or withdrawn from the market.

No additional buildings would be completed before 2012, he said. ”Tenants will have few options. Those requiring large floor plates will have to look far afield.”

Tenants with signed leases include Marsh, BP and Channel Nine, which have taken a total of 37,000 square metres at 717 Bourke Street. The Australian Taxation Office has committed to 38,000 sq m in Collins Street.

Knight Frank associate director of research Richard Jenkins doubted that Melbourne’s CBD office vacancy rate was close to its peak but it was unlikely to go above 7.5 per cent. Rents were set to rise by 13 per cent over the next year as white-collar employment and the economy continued to expand, Mr Jenkins said.

Australia has come through the GFC in very good shape due largely to significant, preemptive and effective policy action from the Government and the Reserve Bank. Despite rising interest rates, economic growth is expected to return to ‘trend’ by the second half of 2010 buoyed by record population growth, a lift in dwelling construction and strong mining and infrastructure investment…

Click to download this issue