Aussie opportunities

Sydney undersupplied, but Melbourne is where potential lies

Singaporean property buyers who may be looking for opportunities to invest Down Under should consider picking up Melbourne residential properties given the high housing demand and potential for price appreciation there.

“Australia remains in chronic undersupply in housing,” said Mr Bob Johnston the managing director of Australand, the Australian unit of local property giant CapitaLand.

That shortfall is estimated at 200,000 homes and about half of those are in Sydney. But Mr Johnston believes Melbourne provides good potential given the strong employment growth and affordability of homes there.

Over 50 per cent of Australand’s projects that are in the pipeline are weighted to the Melbourne market and that will likely give them an advantage in the Australian residential sector, Mr Johnston said.

Singaporean property hunters might as well take heed of Mr Johnston’s views seeing how he steered Australand back to profitability after chalking up losses last year.

From a loss of A$268.8 million ($332.6 million) in the first half of last year, Australand bounced back with net profit after tax of A$72.2 million in the first half of the year ended June – supported by revaluation gains of A$11.8 million in its investment property division.

That segment currently contributes 80 per cent of its earnings and – excluding this revaluation gain – Australand’s Investment Property Division registered A$82.6 million in earnings before interest and tax (Ebit).

But the group sees earnings from its investment property division to eventually comprise 60 to 70 per cent of its business, as it expects the development division to grow in the next two years.

The property firm – whose main businesses are in Melbourne, Sydney, Perth, Adelaide and Brisbane – is optimistic that it will achieve its full-year profit guidance as market sentiment continue to improve in Australia in the next few months.

“Generally, we are seeing positive sentiment in the market place. Business and consumer sentiment remains reasonably robust and we’re expecting conditions continue to improve,” said Mr Johnston.

So far, Australand has seen strong momentum in sales over the past few months.

For the current half year, it has sold about 800 lots – which constitute land, land with houses or land with apartments. It has also secured 1,243 lots which are in the process of being delivered.

This is much higher than the 400 forward contracts in June last year, said Mr Johnston.

“I think the key challenge is to make sure that our product continues to be targeted to the broad market and not just one sector of the market,” he said.

Australian properties have also become an attraction for Singaporean investors due to their reasonable value, said Mr Johnston.

But it is the Chinese property buyers who have been contributing about 5 to 6 per cent in the group’s revenue in the last two years, translating to around A$60 million to A$70 million per year.

The group currently has a Hong Kong sales office which caters to this market.

A tip from Mr Johnston for property buyers: When it comes to choosing properties, Australand prefer to stick to major markets and growth regions – taking into account the government’s target, level of employment and the infrastructure there.

Source : Today – 6 Aug 2010