The road ahead for Australian property: Colliers' Nerida Conisbee
The Reserve Bank of Australia board has elected to maintain the nation’s cash rate at 2%. While a global economic recovery remained soft, there were some benefits to be found for Australia’s property sector.
Concerns over a potential Greek exit from the Euro and the lowest share in global growth by emerging economies in over a decade are at the forefront of economic discussions at present.
A more primary concern has been identified in China, Australia’s largest trading partner, with economic growth in the first quarter of the year slowing to 7%.
However, overall, the global recovery still on track as the US and UK move ahead.
The situation in Greece is unlikely to have a discernable impact on Australian property demand, however there is expected to be a move by some investors to safe haven locations. When it comes to buying property, Australia is considered a safe location.
The Australian dollar has reached a six year low as the ‘no’ vote in the Greece referendum on Monday raised uncertainty in the financial markets. This depreciation of the dollar could temporarily alleviate pressure upon the RBA for further rate cuts, as the economy adjusts to falling commodity prices and mining investment.
A low Australian dollar is likely to encourage some offshore investors to look even more favourably upon Australian property. This includes China, which is now the strongest offshore investor in Australian property.
Job advertisements were up 1.3% in June, according to figures from ANZ, and we are seeing this being reflected in high levels of tenant enquiry, particularly in the Sydney and Melbourne CBDs.
At the moment, business services and the IT&T sectors are driving demand, however we are starting to also see higher levels of enquiry from financial services firms.
Dwelling price growth continues to surge ahead in Sydney and Melbourne as property continues to be the largest contributor to Australian GDP.
Looking forward, growth in spending is forecast as household goods retailing is expected to benefit from the large pipeline of residential construction. Further stimulus is expected from the Government’s small business tax package.
Large format retailing is expected to be the main beneficiary of this growth and these high levels of consumer demand are also reflected in strong investor demand in this type of shopping centre asset.
Nerida Conisbee is national director of research for Colliers International.