John McGrath's reasons to be cheerful

by: Lyndall Crisp

From: The Australian

May 23, 2013 12:00AM

McGrath Holdings managing director John McGrath says apartments have now become hot property for baby-boomers. Picture: Renee Nowytarger Source: The Australian

LOWER interest rates, cashed-up buyers from China and increased activity in the

property market by self-managed super funds are just three of the reasons why John

McGrath feels Australian residential real estate sales have not only turned the corner,

but will continue to improve over the next 12 months.

"No one wants to ring the bell because there's always something around the corner that's unforeseen," he says. "But at the moment, we've got an economy that appears to be improving, and a Chinese economy which seems set for continued growth of which we'll be a major beneficiary. We've got a likely change of government, which I think the business community will look forward to, with the polls suggesting it could be anything from a strong victory to a landslide."

Another positive, he believes, comes from sharemarket gains in the past year.

McGrath - a 30-year veteran in the Sydney market and for 20 years the chief executive of his own company, McGrath Estate Agents - says the top end of the market appears to have plateaued and buyers who've been marking time on the sideline hoping to pounce when it has bottomed are starting to return to auction rooms.

Sales of "trophy properties" have picked up, he says, pointing to two properties just sold in Sydney's Point Piper, one for $53 million and the other for $33m.

"Those two trophy sales are a very interesting indicator," McGrath says.

"Both went to Chinese buyers, that's a graphic illustration that a lot of wealth is coming from offshore into the Australian market.

"In China, Hong Kong and Singapore they see Australia as a good place to invest."

The internet captures the bulk of inquiries. Some international buyers travel here to check out the market in person; others buy sight unseen.

McGrath sold an apartment to a businessman in Dubai who'd seen only the floor plans, and a $3.75m house in Mosman to a Chinese buyer who sent a friend to check it out.

"We're forming alliances every week with taxation, legal and immigration specialists," he says. "We've taken some projects up to China on behalf of a few developers over the last few years."

Another factor that McGrath says will influence the high-end market is Australia's significant investor visa, introduced in November last year. It has already attracted more than 170 applications with a potential of $850m in investment.

Applicants must invest at least $5m in the Australian economy and, provided that's maintained for four years, they then become eligible for a permanent visa. So begins the search for property.

But McGrath believes the biggest growth area is apartments.

Young people who can't afford a house will start with a 90sq m flat to get on the first rung of the ladder. Investors are also big buyers at that level; according to the latest figures by Australian Finance Group, 47.4 per cent of mortgage sales in NSW were to investors.

But the biggest demand is from downsizing baby-boomers; cluey developers are building them pet-friendly 150-250sq m apartments with a gym, swimming pool, security and concierge, close to transport.

There are 53 offices in the McGrath network, with 450 sales agents selling through franchises in NSW, southeast Queensland and the ACT. Last year they sold about $5.9 billion worth of residential property.

Expansion plans are always in the air, but McGrath is cautious about over-extending.

His role model is Apple, one of the biggest companies in the world but with only a handful of products. "I look at them and think I don't want 1000 offices in Australia but to be in the suburbs where we think we can add value with clients that are looking for an edge," he says.

"More importantly, we must have the right partners."

Every capital city in Australia is a potential market for the real estate agency down the track, McGrath says. The company has embraced social media as an important business-to-client tool; McGrath's Facebook page, with more than 4500 followers, Twitter and Pinterest posts are 98 per cent comments on market trends and on interesting properties and designs as opposed to sales pitches.