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Property markets yet to bottom out |
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HOME >> NEWS >> Property markets yet to bottom out |
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 PROPERTY markets in Australia's major cities are yet to bottom, with Sydney residential property the most likely to recovery first, according to the latest Australian Property Directions Survey.
The 21st edition of the half-yearly sentiment survey compiled by industry group the Australian Property Institute (API) found that most metropolitan property sectors would bottom in 2010.
Leading the recovery in late 2009 however would be the residential sector in Sydney, followed in 2010 by the residential sector in Melbourne and Brisbane, and the retail sector in all three cities.
Concurrently it was predicted that industrial property would remain stagnant, while commercial property would regain strength first in Sydney, followed by Melbourne, as Brisbane commercial property continued to decline.
The survey gauges sentiment among property industry professionals including financiers, analysts, fund managers and valuers.
Thirty one respondents participated in the latest edition, although API Research Committee chairman Phil Bennett said other respondents were late in returning data.
Respondents included a who's-who of the Australian property universe, including Commonwealth Bank, NAB, Westpac, ANZ, Macquarie Bank, JP Morgan, Merrill Lynch, Lend Lease, GPT Group, Mirvac, Ernst & Young, Jones Lang LaSalle and CB Richard Ellis.
Of significance was that the majority of respondents said yields across all property sectors would increase, not due to rental shortages but because prices would drop as the higher price of risk capital was factored in.
"This is due to the risk weighting of capital, chiefly with higher interest rates and availability of funds,'' Mr Bennett said.
"Before, there was a very narrow band between the official rate and yields.
"That is now starting to increase, to reflect the true risk that goes with property which people to a large extent were leaving forward in previous years.
"The result will be a potential for retail, industrial and commercial properties to decline in value over the next 12 months, as this new risk weighting is applied.''
In particular, rent increases were expected in the residential sector, but in the retail, industrial and commercial sectors rent growth was predicted to be nil.
"The compensating factor that was there before was increased rents,'' Mr Bennett said.
"That compensated any decrease in yields, but our survey showed that the potential for increased rents was probably zero, or very marginal.
"The consequence is a fall in property values in retail, industrial and commercial.''
Other survey findings included a continued flight of capital from both listed and unlisted property vehicles, although the latter was considered less exposed to current volatile equities sentiment.
Most respondents thought it would be unlikely that residential property would outstrip equity market returns any time soon, although on a five-year outlook the chances narrowed to about even.
Growth in retail, industrial and commercial capital values was considered to be incapable of matching increases in the consumer price index over the next 12 months.
Mr Bennett said it was also likely that the availability of industrial and commercial space would increase, as tenants moved toward sub-leasing to rein in costs.
The majority of survey respondents said they expected Australian interest rates to decline, and that inflation would back off as of March 2009.
Source: http://www.news.com.au/ |
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