THE commercial, industrial and retail property markets in Sydney, Melbourne and Brisbane will steadily improve over the next two years, according to the API Australian Property Directions Survey.
The industry survey uses property clocks to represent the property cycle.
Respondents said all four property classes, commercial; industrial; retail and residential in Sydney and Melbourne are currently seen as on the upswing of the cycle.
The exception is Brisbane’s commercial, retail and residential, which are at the bottom of the cycle.
API Victorian president Steve Simpson said respondents expect a gradual climb along the upswing of the property cycle for commercial, industrial and retail property markets in Sydney, Melbourne and Brisbane over the next two years.
“Sentiment has improved from six months ago, with respondents seeing positive improvements in market values and rents for those property classes in all CBDs of the three cities of Sydney, Melbourne and Brisbane.
“Residential property is seen as advancing along the upswing in the property cycle for Sydney and Brisbane but is seen remaining static on the upswing in Melbourne. Brisbane is seen as being slightly behind Sydney and Melbourne across all property classes for the next couple of years,” he added.
Simpson said similarly to September 2010, the largest growth projections over the next 12 months for market and rental values above CPI are for Melbourne CBD commercial property.
Market and rental values for retail and industrial property in Sydney, Melbourne and Brisbane CBDs are higher than they were in the September survey.
More respondents predict that the non-residential property sector will perform the same as equity markets or are likely to outperform them in the next one to five years.
Most respondents also forecast a moderate investment growth for both Australian listed and unlisted property trusts and syndicates over the next 12 months. 73% expect at least a moderate growth in listed domestic trusts and 69% of respondents see at least a moderate growth in unlisted trusts and syndicates over the same period.
However their views on international listed and unlisted trusts and syndicates are less certain, with most respondents predicting a moderate decline up to moderate investment growth for the next 12 months.
Respondents also expect yields and returns to owners will be most impacted by the new energy efficiency disclosure requirements for commercial property, compared to the impacts on rents and leases.
“Yields are expected to tighten for higher rated properties to a minimal extent in the short term of 12 months but more so in the long term of two to five years. A minimal impact is predicted for the return to the owner in the short term whilst in the long term properties having a low rating will require upgrading to remain competitive.
“Respondents consider that in the short term there will be minimal impact on rents but in the longer term there is potential for rentals to increase to reflect the tenant demand for higher rated properties. It is considered that there will be a minimal impact on the structure of leases to reflect the rating in relation to outgoings, however tenants will still be aware of the total occupancy cost including rent and outgoings,” Simpson said.
Meanwhile lowering gearing is no longer a high priority.
Simpson said more than half of the survey respondents see the property industry less focussed on lowering gearing ratios than six months ago and now predict no change to gearing ratios or higher gearing ratios.
“The survey also shows a positive change in sentiment for property financing with 61% of respondents seeing lower to no change in financing costs.
“The industry is continually re-assessing risks in relation to property and property financing costs and survey respondents see a brighter outlook for gearing ratios and property financing costs than six months ago,” Simpson concluded.
Australian Property Journal
