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RBA cash rate cut needed in February

Friday, December 28, 2012

The Reserve Bank needs to cut the cash rate by a large amount in one big hit to stimulate a recovery in the housing market, according to Residex chief executive John Edwards.

On the back of November Residex housing market data, which shows many markets in negative territory or treading water, Edwards says the Reserve Bank should look to cut the cash rate by 75 basis points in February.

“Should the RBA continue along the road of small reductions, there is a real risk that it will need to reduce the cash rate to 2% or less.

“However, should it move to a much more significant reduction in February (of around 0.75 percentage points), this would probably achieve its objectives and bring the cycle of small rate adjustments to an end.

“The outcome would be the removal of constant press about the likely poor outcome as the resources boom comes to an end.

“Importantly, it would be probably sufficient to stimulate consumer spending and encourage small business investment. In all probability, this outcome would lead to a much improved level of consumer sentiment,” he says.

Edwards says housing markets had done better in 2012 compared to the previous year, but had failed to keep pace with inflation.

“The majority of cities have produced negative real rates of growth (after taking inflation into account). In fact, the real growth was a -2.8% in housing while for units it was -1.23%,” says Edwards.

Despite the poor performance of the market in 2012 in real terms, Edwards says he expects all adjustments in house prices since the GFC to be “recovered in the medium term, and prices are anticipated to be equal to or better than before the GFC”.

'Pit-to-port project' announced for Abbot Point

Wednesday, December 05, 2012

BILLIONS of dollars from India are inundating Queensland's mining industry as hopeful proposals to develop the Galilee Basin to the west of Rockhampton, Mackay and Gladstone evolved into solid projects.

Deputy Premier Jeff Seeney was keen to spruik what these dollars and the mining revenue the projects would create, in a week where news on astonishly large mines now appears commonplace.

On Wednesday, Indian giant GVK announced it had signed a construction deal to build the multi-billion dollar third terminal at Abbot Point, near Bowen.

It came just one day after a $4.2 billion plan for an ACMI mine in the same area released its environmental statement, a crucial step on its path to construction.

Prime Minister Julia Gillard watched the pen hit the dotted line on the GVK deal in Delhi, but was unable to answer questions on her returning flight on Thursday.

Mr Seeney may not have been in the room when GVK boss Dr Gunapati Venkata Krishna Reddy signed the deal with Brisbane builders Smithfield and Korean steelmakers Samsung C&T, but he knew what was coming.

He said there were still management plans for GVK to put together but the "game stoppers" were now out of the way.

"I'm very pleased to see the progress," he told APN on Thursday evening.

"These major projects will provide the next generation of Queenslanders with jobs and the state with income for schools and hospitals."

Mr Seeney said he was keen to encourage the investment of not just GVK but other Indian mine developers Adani and ACMI.

And he emphasised that all applicants were treated exactly the same, whatever their origin.

The LNP government is currently facing allegations from mining magnate Clive Palmer that Indian investors had been given favourable treatment ahead of other developers.

The deal rounds off GVK's trio of massive Queensland investments including the Alpha Mine, plus 500km of railway connecting the mine to a GVK port capable of handling 70 million tonnes of coal each year through its two ship berths.

The Alpha Mine and GVK's neighbouring project Kevin's Corner will both produce roughly 30 million tonnes of coal per year, making them two of the largest energy coal mines in the world.

Alpha is due to start mining in 2015, with Kevin's Corner to follow suit 12 months later.

The port will need to be ready to handle the first Alpha coal deliveries.

The Abbot Point expansion is expected to cost between $2 billion and $4 billion with early estimates pointing to a total cost of $10 billion for the mine, rail and port package.

It will create 650 jobs during construction with another 100 needed to operate the port full time.

GVK's Mr Reddy described the deal for his company as a "key strategic development".

"This is the first major step towards finalising the construction contracts and completing the financing for the project which is well under way," he said.

Full steam ahead for mining in Qld

Wednesday, December 05, 2012

ALMOST $13 billion in coal projects are being built in Central Queensland, even as the world's multi-national mining firms release trickles of information on cost-cutting and job losses.

Hit by a global fall in coal prices and the increasing cost of doing business in Queensland, coal giants have sliced contractors and staff from projects.

But the region is far from surrendering to the tumbleweeds.

Three new mines, two extensions and one giant port expansion in the Bowen Basin have Rio Tinto, Anglo American and BHP Billiton Mitsubishi Alliance shelling out billions in an apparently difficult time.

These six illustrate how the industry is powering on.

Rio's Kestrel Mine expansion was announced in 2007, but it was still an astonishing project by the numbers.

From first sod to completion in 2013, the $2 billion Kestrel will have provided jobs for more than 1100 workers between the still-operating mine and its expansion work.

A Rio spokeswoman said the extension alone had taken "4.2 million man hours so far and more than 3000 tonnes of steel had been used".

Anglo American's $1.7 billion Grosvenor project only started building in June with first coal to be mined by late next year. However, underground mining would not start until 2016.

Grosvenor will supply more than 1000 jobs during construction and operation.

It will need 3000 tonnes of structural and reinforcing steel, 13,000cu m of concrete and take estimated four million man hours to build.

BMA has perhaps the most ambitious schedule with expansions of Hay Point Coal Terminal and Broadmeadow Mine worth a combined $3.4 billion.

Add that to the building of its two new mines - $4.2 billion on Caval Ridge and the $1.6 billion for Daunia - and it amounts to more than $9.2 billion worth of construction.

BHP Billiton chips in half of the funds for its projects, with the rest funded by alliance partner Mitsubishi.

Earlier this year, BMA shuttered its Norwich Park and Gregory mines when they stopped making money.

However, the giant was clearly looking beyond the horizon when it green-lit this fleet of emerging projects during the boom times.

Daunia will employ about 1000 during construction and 450 when running in 2013.

Hay Point's expansion will have used 1000 workers by the time it is finished in 2014

Caval Ridge will need 2000 to build and another 500 to operate when it starts in 2014.

 

ON THE GO

Rio Tinto

Value: $2b

Jobs: 1100 (construction and operation)

To open: 2013

Grosvenor (new)

Anglo American

Value: $1.7b

Jobs: 1000 (construction/operation)

To open: 2013/2016

Daunia (new)

BMA

Value: $1.6b

Jobs: 1000 (construction), 450 (operating)

To open: 2013

Caval Ridge (new)

BMA

Value: $4.2b

Jobs: 2000 (construction), 500 (operating)

To open: 2014

Broadmeadow (expansion)

BMA

Value: $900m

Jobs: TBA

To open: 2013

Hay Point (port expansion)

BMA

Value: $2.5b

Jobs: 1000 (construction)

To open: 2014

TOTAL VALUE: 12.9b

RBA Rate cut

Wednesday, December 05, 2012
The RBA has given homeowners more good news – with the RBA announcing today that they will reduce the cash rate by 0.25 points to an overall rate of 3.00%. This equals the lowest level ever for Australian homeowners and has come about due to a multitude of factors which highlight that not only Australian growth but global growth is also slowing. The Organisation for Economic Co-operation and Development (OECD) predicts that Australian growth will slow by 0.7% next year compared with figures this year.

Housing Price Growth to continue

Wednesday, November 14, 2012

We are returning to moderate housing price growth, but no bubble: Terry Ryder

Talk is cheap because supply exceeds demand.

The cheapest talk comes from economists speaking about real estate, because supply (endless) is hugely in excess of demand (zero). There’s also a low price on the articles of most journalists about property because the demand is for a David Jones product but most of the supply is coming from Gone Bonkers.

So, after two years of price decline or stagnation in our major cities, at the first sign of price recovery they’re out there talking up a bubble.

Yes siree, if you crave a bit of media limelight the shortest route is to contact a lazy journalist and give them a sound byte with the word “bubble” in it.

Data from the various research sources indicates we’ve had three or four months in which the average result across the state and territory capital cities has been a rise in median prices.

I’m not sure how reliable the data is, because organisations like RP Data are so desperate to be first with the news that they’ve been calling the monthly price movement on the last day of the month, something that’s difficult to do credibly. Indeed, this week RP Data declared the October price movement 10 days before the end of the month. Is the need for publicity really that desperate?

Nevertheless, the trend evident in the figures from various research sources is one of big-city prices now starting to trend north, slowly.

Further to that, a number of forecasters are predicting rising prices in the near future. BIS Shrapnel is tipping growth in all eight state and territory capitals in the next three years, with the strongest to be in PerthBrisbaneSydney and Darwin, where the rises are expected to be solid but not spectacular.

National Australia Bank published its survey of Australian property professionals, most of whom are expecting moderate growth in the next 12 months.

So we appear to have a return to price growth, though small, with the prospect of more moderate rises.

But there’s no middle ground with media. It’s either boom or bust. Now it seems even the smallest rise in house prices instantly has the label “bubble” slapped on it. Alternatively, a cut in interest rates gives rise to fears of a bubble.

David Uren, who writes about economics for The Australian, recently tried to link fears of a house price boom in Australia into an incoherent rave about inflation and global financial instability. Some fairly innocuous remarks by business leaders have been portrayed by journalists as fears about a bubble, when the people quoted never used that terminology.

Bubble talk has been around for the past five years. It started when a metropolitan newspaper journalist misquoted RBA governor Glenn Stevens and the mistake was repeated as fact by media outlets around the country. Economists and journalists have been promoting bubble talk ever since, although Stevens never said the words reported. It wasn’t merely a beat-up – it was a lie.

I’m still waiting for someone who subscribes to the bubble theory to actually define it. So far, nobody has. The term implies that something has been over-inflated and will burst.

Despite all those dire predictions about a collapse in our home prices since 2007, mostly from publicity-seekers based overseas, the forecast implosion hasn’t happened.

So why are we talking about a bubble now, when capital city prices have barely budged after two years of mediocrity? Because we’re beset with writers and commentators who are shallow, lazy and like the sound of their own voices.

Terry Ryder

Should you Invest in Property or Shares?

Wednesday, November 14, 2012

Shares or property?

Ahh, that old chestnut…  It’s a question that is often asked.  What performs better?  Shares or property?

On a capital appreciation measure over the past decade, the past half-decade, and over the past three years, residential property has well and truly outperformed shares.  Over the most recent 12-month period shares have outperformed the housing market.

It’s important to note that the share market has shown periods where capital gains have been substantially higher than what has been achieved in the housing market.   As can be seen in the ‘rolling annual change’ graph below, the annual growth rate in the ASX 200 has been has high as 39% over a 12-month period (the year ending February 2010); share prices have also fallen by more than 40% in the space of a year, which is what happened during the GFC (the ASX 200 fell by 42.7% over the year ending November 2008).

Capital city dwelling values haven’t shown anywhere near the same level of volatility.  The largest rise over any 12-month period, based on the RP Data-Rismark eight city aggregate index, was 21% over the year to May 2002, and the biggest fall was recorded just recently when dwelling values fell 5.3% over the year to May 2012.

While the volatility of the share markets may appeal to some, it is the stability and resilience of residential housing that is likely to be one of the key reasons why investing in the housing market is a popular choice for mum and dad investors.

Click to enlarge

Click to enlarge

Tim Lawless is national research director of RP Data.

Mining Boom to continue in 2014

Wednesday, November 14, 2012

By Larry Schlesinger
Monday, 12 November 2012

Australia's mining-led construction boom will peak in 2014 with the value of planned projects already starting to contract, according to the Deloitte Access Economics September quarter Investment Monitor.

Deloitte Access Economics expects investment levels to continue to rise in the short term and then peak in 2014 as fewer projects move through planning to the construction phase.

It notes that investment in mining projects has been the “major driver of economic growth” but says that “all good things must come to an end”.

Mining investment projects currently account for nearly half (46%) of all major construction projects  either under construction or mooted, with transport and storage infrastructure projects (many tied to mining projects) making up nearly a third (31%).

The report finds that the value of planned projects has fallen back slightly over the past three months by $10.6 billion to $465 billion due to a lack of new resources projects, and some project cancellations, including BHP Billiton’s $20 billion Olympic Dam mine expansion project near Roxby Downs, as well as the delaying of the Port Hedland outer-harbour port expansion project in the Pilbara region in WA.

“While the bulk of other resources projects in planning are still on the agenda, there are question marks over the scale of some potential projects, such as Fortescue’s $6.2 billion Solomon mine expansion and [Gina Rinehart’s] Hancock Prospecting’s $9.5 billion Roy Hill project," says Deloite Access Economics.

Question marks also hang over Xstrata’s possible $6 billion Wandoan coal mine in Queensland, which has been placed on hold until market conditions improve, while BHP Billiton’s plans for a $3 billion expansion of the Peak Downs coking coal prospect have been shelved.

The Investment Monitor, which tallies all private and public engineering construction, non-residential building and equipment investment projects in all Australian industries, found the value of projects increased by $6.2 billion, or 0.7% from the June quarter, and has increased by 3.7% over the past year.

As the chart below shows, the mining boom accelerated from March 2011, but has slow-down since the start of the year.

Value of definite projects by status ($billion)

Click to enlarge

Queensland Booming Property Market

Thursday, October 04, 2012

Retail investment in Queensland contributed the highest share nationally over F2011/12, according to Colliers International.

Colliers International’s National Retail Investment Review 2011/12 says that for transaction activity over $10 million, Queensland recorded 26 sales over the period – three of which were among the top 10 biggest sales nationally.

Major sales included Industry Superannuation Property Trust’s purchase of a 50 percent share in the Myer Centre Brisbane for $366 million, Australian Prime Property Fund Retail’s acquisition of 50 percent stake in the Cairns Central Shopping Centre for $261 million and the sale of Noosa Civic to Queensland Investment Corporation for $200 million.

The 50 percent stake in the Myer Centre Brisbane was the largest retail acquisition in Australia over the period.

Nationally Colliers recorded a total of 83 major retail investment transactions over the period, with a total value of $4.244 billion. This is an increase of 8 percent on the previous financial year.

Queensland, New South Wales and Victoria accounted for around 77 per cent of sales by number, Colliers says.

Stewart Gilchrist, Colliers International National Retail Director said investor demand for quality shopping centres was resilient over the 2011/12 financial year despite volatility in retail trade data.

“Investor demand for quality shopping centres was buoyant, but there was also strong interest in underperforming centres with repositioning potential,” Gilchrist says.

“There has been strong interest in prime regional shopping centre assets from institutional investors from Australia and overseas, with demand continuing to exceed supply.”

Neighbourhood centres led activity with 35 sales over the period, but a historically high number of regional centres were sold, with seven centres comprising 44 per cent of all sales by value.

Fifteen sub-regional centres sold, up from five the previous financial year. The sub-regional category saw the biggest jump in sales volume of all sectors.  Source:Property Ezine

A link to a webinar worth watching if you are serious about property investing

Thursday, October 04, 2012
http://www.propertyobserver.com.au/webinars/free-webinar-why-the-mining-boom-is-far-from-over

Gladstone - strongest queensland property market

Thursday, October 04, 2012

Investor darling mining town Gladstone strongest Queensland regional housing market, while Bundaberg struggles like the Gold Coast

By Cassidy Knowlton
Monday, 09 July 2012

Regional areas have outperformed capital cities in the year to March, according to ANZ, with Gladstone leading the way in Queensland. 

"Despite being lower in annual growth terms, regional house prices have been more stable than capital city house prices, which have seen larger price falls across all major states and territories," notes the Australian Housing Chartbook.

"Across states/territories and regions, house price growth has continued to differ, reflecting varying economic performance across Australian industries."

"Queensland has shown the greatest intra-state variation in regional house prices, reflecting the divergenteconomic performance of regions exposed to the tourism sector (i.e. Cairns, Gold Coast) and mining-relatedservices (Gladstone, Mount Isa)," the report says.

Click to enlarge

 

Source RP Data, Rismark, ANZ


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