Nsw Exit Tax Casts A Shadow
The Age
Saturday April 17, 2004
As a property exit tax looms in NSW, investment professionals are reviewing their options beyond the Sydney CBD in a bid to escape tax penalties. Set to benefit their decision making are the counter-cyclical positions of office markets in Melbourne and Brisbane.
In a survey of key property industry professionals by advisers and valuers LandMark White, 41 per cent of respondents believe the Sydney market is at the bottom of its cycle, 32 per cent believe the market is falling, 17 per cent see it rising and 10 per cent say it is at its peak.
Regarding Melbourne, 84 per cent of respondents believe the market to be falling, while 53 per cent say Brisbane is in an upswing.
As far as market peak expectations are concerned, most respondents tipped 2007 as the year Sydney and Melbourne will again come unstuck, with Brisbane expected to peak next year.
LandMark White's national research director, Jennelle Wilson, says the consensus is that the Sydney and Melbourne markets are several years from peaking.
``The survey shows that 30 per cent of respondents believe Sydney's vacancy rate would remain steady, while almost 40 per cent anticipate a fall of up to 200 basis points," she says.
Ms Wilson says prime yields in the Sydney CBD are expected to be about 6.8 per cent, with rents expected to stay stable or improve over the next two years.
Almost 90 per cent of respondents expect that the Melbourne office market will continue to be hampered by weak tenant demand.
Demand from big companies is seen to be absent from Melbourne, but it is believed to be active in Sydney and Brisbane.
The Melbourne office market again received a poor health check, with almost all respondents predicting vacancy rates would rise in the eastern seaboard capitals. Almost 45 per cent of respondents expected a 100 basis point rise in the vacancy rate in the next 12 months.
Melbourne and Brisbane received similar expectations for prime yields, at 7.7 per cent and 7.8 per cent respectively, but respondents favoured Brisbane as the more likely city to experience a tightening of yields.
The weak Melbourne sentiment was carried into expectations for rental growth, where 57 per cent expected local rents to fall in the next two years. This, however, was considered an improvement on the 87 per cent recorded one year ago.
The survey indicates the greatest attractions for investors in the key capital city office markets is opportunistic buying and the depth of the market.
Disincentives included low yields in Sydney and oversupply in Melbourne and the poor net absorption of office space of both markets.
The survey found the apparent negative sentiment towards Melbourne had failed to deter buyers, and investment in the market was set to continue.
LandMark White found that $738.1 million of office turnover was recorded in the 12 months to February, with 20 properties (each of more than $5 million) changing hands.
The purchaser profile, according to the survey, was made up of listed property trusts (47.9 per cent), unlisted trusts (21.9 per cent), syndicates (12.8 per cent) and private investors (10.3 per cent).
Meanwhile, LandMark White's state managing director Tim Gavan, in a effort to clarify the NSW Government's property tax announcements, expects mixed impacts on different market sectors.
In commercial property, Mr Gavan says, a vendor transfer duty would have no effect on current new strata-title prices as they appeared to be exempt, although Treasury has yet to rule on this.
``The sale of second-hand units will be affected if they sell for a profit of 12 per cent or above," Mr Gavan says.
© 2004 The Age
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