Rates fall hope for investment

THE global credit crunch effectively put the brakes on the Western Australian property market during the latter part of 2008, limiting sales volumes and hampering the development of new projects.

One of the biggest sectors to be affected was the investment sales market, as investors chose to wait for bargains.

The level of investment sales activity was almost half that of 2007, with just 12 transactions of CBD investment properties over $5 million, to a total of $292 million, taking place.

Tightening credit conditions placed increased hurdles in front of buyers, particularly for larger deals, with sales of more than $20 million exhibiting the biggest slowdown and a number of big CBD assets failing to sell, according to Colliers International research.

But Colliers director of investment sales Ian Mickle told WA Business News the number of enquiries has increased in recent weeks on the back of falling interest rates and rising yields.

"The level of enquiries we're fielding now should translate into a lift in sales activity towards the end of the first quarter of next year," he said.

Several investment projects were shelved as a result of economic conditions, including Capital Square stage two, 2 Bishops See, and 18 The Esplanade, with an almost 60 per cent drop in projects committed.

The office-leasing sector remained strong, however, with rents topping $900 per square metre in the CBD mid-year, cementing Perth's place as the country's tightest and most expensive office market.

Perth experienced the lowest vacancy rates in its history - just 0.3 per cent in the CBD and 0 per cent in West Perth.

It was a strong year for major pre-commitments, with KPMG, Macquarie Bank and Worley Parsons signing up to 1 Bishop See, Hamersley Iron taking 12,000sqm in Wesley Quarter, and NAB taking 8,900sqm in Century City, joining Apache and Inpex in the new office development.

Colliers secured the biggest leasing pre-commitment deal in Perth's history, signing up BHP Billiton to 60,000sqm at City Square.

Perth's industrial market also came off the boil, with the number of transactions falling by more than 40 per cent in 2008.

The residential market softened further during the year, with the median house price dropping for three consecutive quarters.

The Real Estate Institute of WA said the Perth housing market was moving into "uncharted territory", as the median house price fell by just more than 2 per cent in the September quarter to $435,000, down from $445,000 in June and down by 8 per cent on the peak price in December 2007.

Successive interest rate drops in the latter part of the year bought the cash rate to a six-and-a-half-year low of 4.25 per cent, with further interest rate cuts tipped in the early part of next year.

It was also turbulent year for the listed property sector, with WA-exposed companies including Centro, MFS, GPT, Allco and Becton, severely hit.