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Investors pick property despite the grumbling

October 2, 2007

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DESPITE claims of a worsening slump in NSW home building, close to 73 per cent of property professionals believe the Australian residential market will grow over the next six months, according to the latest Ashe Morgan Winthrop Property Investors sentiment survey.

It is the strongest result in the 11 years of the survey, which received 846 responses nationally from large and small property investors, lenders and advisers.

The optimism among property insiders is contradicted by building materials groups.

Last week the directors of Brickworks, one of the country's largest building material suppliers, said NSW was about to enter its most prolonged housing construction downturn since the Depression. It said the housing crisis gripping Sydney's outer suburbs was bound to continue as long as interest rates stayed at present levels.

In contrast, more than half of Ashe Morgan Winthrop's respondents said they now preferred investing in residential property over all other property classes.

The survey showed that more than 60 per cent of investors were also positive about the Victorian and Queensland residential markets, which have not risen as high as NSW nor fallen as low. Most also felt that the West Australian market had peaked after the mining boom led to home price rises of as much as 80 per cent over the past few years.

The survey says NSW witnessed the strongest resurgence in investment intentions. More than 64 per cent of the state's property professionals reported they were likely to invest in property over the next six months. More than 63 per cent believed the NSW residential market would improve over the same time period.

An Ashe Morgan Winthrop director, John Winter, said that after the "doom and gloom of the past two years, we are now seeing a renewed confidence across the residential markets".

"The survey found that 48.7 per cent of respondents reported that the NSW market is improving compared with only 24.3 per cent in the previous survey. Just 22.7 per cent believe the market is at the bottom of its cycle," Mr Winter said. "It also found that 63.2 per cent believe the NSW residential market will improve in the next six months, up 8.1 percentage points. But NSW still lags behind the other major markets on this indicator.

"This widespread confidence comes in spite of the fact that investors are expecting another interest rate rise.

"Property professionals have clearly already factored a rate rise into their investment plans, so when it happens, there should be no cause for alarm.

"The survey found that just over 71 per cent of property professionals expect an interest rate rise of at least 25 basis points within six months, a figure up sharply from the autumn result."

Mr Winter said the NSW office sector was a close second as the preferred place for cash, thanks to low vacancy rates and limited available stock.


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