insto - Australian financial markets

The focus by owners and investors on portfolio restructuring and debt rollover for the first three quarters of the year will continue to be an issue for the listed sector, particularly smaller AREITs.

The Australian commercial property market is starting to recover from the property downturn, but it will be a slow process, with 2010 characterised as a year of consolidation.

Retailers and investors grow increasingly confident about the outlook for the retail property sector, resisting signs of downturn.

According to Jones Lang LaSalle’s (JLL) Q309 statistics, the downturn is turning out to be much milder than expected.

The quarter has seen “signs of recovery in the level of retailer demand for space, a stabilisation in both vacancy and rents in most monitored markets, yields for prime assets, and growing investor confidence,” said Leigh Warner, JLL’s national retail analyst.

The AMP Capital Investor group has inked an agreement that will expand its business in Asia.

The agreement is for AMP to acquire 50 per cent of MacarthurCook Industrial REIT’s (MI REIT) management and property management companies as well as taking a cornerstone stake of up to 19.2 per cent in the Singapore-listed MI REIT. The cornerstone stake is worth up to A$42.6 million (S$54.1m). MI REIT has a property portfolio valued at approximately A$389 million (S$494 million).

Moody's Investors Service has revised its outlook for Australia's real-estate investment trusts (A-REITs) to stable from negative, given its view that fundamental credit conditions for the sector will firm over the next 12-18 months.

"There are clear signs that the business conditions for the A-REIT sector are stabilizing, with Australia's economy outperforming expectations of earlier in the year, and avoiding a recession," said Clement Chong, a Moody's vice president, on the release of Moody's update on the sector.
 

National house prices were up 4.2 per cent in Q3 after the same rise occurred in Q2 and a 5.5 percent decline over the previous four quarters.

A Westpac Group report said this result exceeded consensus expectations of a 3 per cent rise and the official data is stronger than most private sector measures had suggested.

Prices are now up 6.2 per cent and are significantly above previous peaks in all capital cities except Perth.

Westpac and Commonwealth Bank of Australia (CBA) together hold close to 50 per cent of all outstanding residential lending by value, and are increasingly gaining market share as the two mortgage giants.

With the Reserve Bank cutting cash rates, and the biggest corporate customers seemingly well-looked after by the banks, the mid-market segment is feeling hard done by, reports Robert Morgan*.

The rapid slide in property values appears to have slowed, but investors should not expect any sort of recovery in 2009, and possibly not until well into 2010.

Commercial property values have been under pressure through the first half of 2009. Re-pricing of risk and a weaker outlook for rental growth, as the economy slows, has seen property valuations wound back, although so far there is limited transactional evidence to support the new range of values, says David Rees, Australasian head of research for Jones Lang LaSalle.

Banks in the Asia Pacific region have largely escaped the challenges faced by their counterparts in the United States and Europe. Post-crisis, Asian banks have lower cost-to-income ratios, leverage at roughly half the levels of the European banks, and average returns on equity that are only slightly lower than pre-2007. The worldwide industry restructuring and shakeout offers Asia Pacific banks opportunities to strengthen their competitive positions.

Australia’s mid-tier mining sector has been severely impacted than previously acknowledged by plunging commodity prices and evaporating demand during the final quarter of 2008. The damage extends beyond share price damage, to include a recognition that the way business is done will need to accommodate the next stage of the boom-bust cycle.