Market Report June 2009

14 Jul 2009


During May we received increasing Buyer enquiry as buyers came to realise that the sun still comes up in the morning.  Several businesses are now under contract and are going through their due diligence.

We have some good businesses to come on to the market in the near future ranging from an ice cream franchise in Hastings Street for under $400,000 to an agri-business at around $6million.

Prospective sellers of good quality businesses have been few and far between over the last 6 months as owners hang on to their good investments until there is some stability in the economy. 


It is the Sellers uncertainty in investing the sale proceeds that has slowed the listings.  As our ASX continues to rise we should see more listings on the market.  This confidence in the economy will also bring more Buyers.


FINANCE

We thank Neil Fraser, RFS Finance,  0412 004 020  for the following information.


BE PREPARED FOR LENGTHY LOAN APPROVALS

Finance approvals are currently experiencing lengthy delays, creating huge increases in turnaround times for clients seeking valuations, credit decisions, documentation and settlement.  One bank, which was processing 4,000 applications a month last year, is now trying to process the same number of loans each week!

Some banks are reporting up to 20 business-day delays before loan applications are even looked at.  RFS recommends that contracts now include a minimum 21-day finance clause and 45-day settlement date.  We also encourage sellers to be understanding if extensions are requested by their buyers due to these delays.


MIGRATION NEWS

Further reductions in the skilled visa allocation are being made to reduce the impact on rising unemployment.  Sponsors and applicant are now being increasingly scrutinized to prove a real need for that migrant to be employed.  However, there will continue to be a genuine demand for skilled migrants in the healthcare industry.


BUSINESS GROWTH

Information supplied from Michael Workman, Senior Economist Global Markets, Commonwealth Bank.  Kindly supplied by Marc Desmarchelier, Accountant, Cooroy, Tel  (07) 5447 7550  who attended the AICD Economic Forecast Breakfast in May.


BUSINESS SECTORS WITH WEAKEST GROWTH OUTLOOK

  • Retail (discretionary) & new car sales
  • Manufacturing - car industry, textiles
  • Commercial construction, rentals & fit-outs
  • Professionals: architects, surveyors, legal/finance
  • Mining construction, related services groups
  • Finance, stockbroking, commercial lending
  • Mining export sectors & related loading/transport
  • International tourism, business travel


BUSINESS SECTORS WITH STRONGEST GROWTH OUTLOOK

  • Staples - groceries, food, cosmetics (gambling)
  • Infrastructure - roads, rail, water, power, related construction, engineering & services
  • Health, defence, education
  • Government related new housing construction, alterations & additions
  • Domestic tourism
  • Insolvency


Other comments included:-

US recession set to end around August/ September 2009
Australia needs China GDP annual growth to be greater than 6%
Policy makers acting pre-emptively - rate cuts & handouts still work
75% of Australia's exports go to Asia
India will surpass North America as our 5th largest export market in 2009
Stimulus packages to raise GDP by 2.75% in 2009/10 and 1.5% in 2010/11
RBA rate at 3% now and may cut to 2.5% in late 2009
Markets see recovery in late 2009 and through 2010
Term deposits at banks are 40% higher than a year ago, to $340bn
Variable mortgage rates down to 5.64% from 9.2% in August 2008
Queensland's population growth is around 100k or 2.5% p.a, well above national rate of 1.8% p.a.
Dwelling commencements are around 40k p.a. so rental growth likely to stay at approx +6% p.a.
CPI at 2.5%, could fall to 1.5% in 2010
Services prices rising further than goods (6.5% p.a compared with 2% p.a.)
Share market in recovery.  ASX 200 expected to be 4200 in December
Median house price for Australia was $500k, down 8% in year to December 2008
Interest rate cuts to lift house prices in second half of 2009
Population growth of Australia of 389k p.a. (1.84%) means dwelling demand above supply