API NSW president Robert Hecek said this survey indicates that all classes of property are currently seen as on the upswing of the cycle, except for Brisbane commercial and retail and Sydney retail, which are at the bottom of the cycle.
Sydney and Melbourne markets are more closely aligned, but Melbourne is ahead in commercial and retail sectors over the next year whilst Brisbane is slightly behind.
API Victoria president Steve Simpson said respondents believe Melbourne CBD lease incentives as fewer than 20%, with the Melbourne Suburban CBD slightly higher in the 20-29% range.
“Overall Melbourne CBD commercial property is seen as having lower incentive levels than commercial properties in the Sydney and Brisbane CBDs,” he added.
On other hand, more respondents see lease incentives in the 20-29% range in the Sydney CBD and this range is generally applicable to the Sydney Suburban CBDs.
And Brisbane incentives are seen across the 10% to 30% ranges but with a leaning to the 20-29% range.
Perth prime commercial property is seen in the 10-19% range with other grades seen in the 20-29% range. Adelaide, Canberra and Hobart lease incentives for commercial property are mainly seen as being in the 10-19% range.
The majority of respondents, 60%, also forecast a decrease in yields for commercial property in the short to medium term and 53% of respondents see a decrease in yields for industrial property, whilst 50% predict no movement in yields for retail property.
Hecek said 72% of respondents believe that the continued re-assessment of risks in relation to property and property financing will result in lower gearing ratios.
“However, respondents are less certain of the impact of risk in relation to financing costs with a small majority of 52% seeing higher financing costs and 31% seeing no change in finance costs,” he added.
Sentiment has also improved substantially for commercial and industrial property since the April survey, with respondents seeing either positive improvements or much lower declines in market values and rents for these property classes in all CBDs across Sydney, Melbourne and Brisbane.
Over the next 12 months the largest growth projections for market and rental values above CPI are for Melbourne CBD commercial property.
Market and rental values for retail property in Sydney, Melbourne and Brisbane CBDs are seen as being lower than in the April survey.
Respondents have also forecast moderate investment growth for both the Australian listed and unlisted property trusts and syndicates over the next 12 months.
“Regarding domestic property trusts, 87% of respondents predict a moderate investment growth for listed domestic property trusts and a smaller but still significant majority of 66% are predicting moderate investment growth for unlisted domestic property trusts,” Hecek said.
Sentiment for international unlisted property trusts / syndicates over the next 12 months are still not overly positive – a majority envision no change in investment growth to a moderate decline.
Finally respondents believe that the non-residential property sector will perform the same as equity markets or are likely to outperform them and a smaller majority of 52% of respondents forecast beneficial impacts for Listed Trusts and Unlisted Property Trusts / Syndicates.
“Sentiment for the non-residential property sector outperforming the equities market improves for the next three year and five year periods,” Hecek concluded.
Australian Property Journal
