The Queensland economy may be slow to recover from all its natural disasters. But it’s Industrial property sector has been quick out of the blocks.
The boom in Queensland gas now has Brisbane with the lowest vacancy rate for Industrial property.
Next comes Melbourne — with Sydney well back in 3rd place, according to a recent survey by Knight Frank.
And increasing demand will put further upwards pressure on rentals … thereby, encouraging more developers into the market. [Read more…]
The Commercial property market is driven mainly by supply and demand — especially Offices.
And therefore, with …
… this means a looming shortage of Office space around Australia — with rentals poised to rise sharply. [Read more…]
Last week’s inflation figures were certainly much better than expected.
As such, there had been considerable political pressure placed on the RBA from by the government to cut interest rates this week.
Retailers were virtually pleading with the RBA to do so. Plus, homeowners were also looking for some relief in the run up to Christmas.
However, this is probably the last interest rate cut by the RBA for quite some time. To understand why, you need to cast your mind back to when the GFC began in 2008.
At the time, business investment was falling.
This is unlikely to occur from now on — because planned mining investment (at $430 billion) is three times greater than in 2008, representing about a third of Australian’s GDP.
And overall, Australia is said to have around $900 billion of business investment in the pipeline.
Furthermore, our main trading partner (China) is now far less dependent upon Western countries for its growth.
In 2008, China’s 12% per annum growth in GDP reflected a 3% to 4% component of exports to the West. While this year’s 9.5% growth in GDP was basically driven by domestic demand — with virtually no exports involved.
Overall, there is said to be around $900 billion of business investment in the pipeline. Add to that the improved stability of Australian banks, with their reduced offshore exposure and improved domestic deposits. Plus, an increase in the Tier 1 capital ratios.
Finally you also need to remember the RBA’s cash rate has now fallen from 7.25% in 2008 to its current level of 4.5% today.
Bottom Line: Apart from the current turmoil in Europe, Australia’s underlying fundamentals are solid. And these augur well for strong growth in Commercial property over the next 5 years.
To reduce interest rates any further would only serve to artificially inflate asset prices — rather than allow the market to grow organically … based upon genuine, sustainable demand.
Last week, to the IMF gave the Australian economy a positive report card — with a projected growth of 1.8% for 2011, and 3.3% for the ensuing 12 months.
Clearly there is international concern about the state of affairs within Europe and the US.
However, that belies the positive impact being provided by the rest of the world.
Although China’s growth is slowing, it still remains at a healthy 9% per annum; and India is not too far behind at 7.5% per annum.
When you add to that Latin America at 4%, and parts of Africa at close to 6% … you then start to see the northern Atlantic problems in some perspective. [Read more…]
The market for Industrial property in Melbourne has remained strong over the past 12 months — enjoying a solid demand from tenants, owner occupiers and potential investors alike.
According to Savills Australia, leasing activity for the twelve months to 30 June this year was up by more than 7% on the five-year average for Melbourne.
The dominant tenants clearly came from the retail and logistics sectors — with over 740,000 square metres being leased. And of that amount, just over 200,000 square metres was by way of pre-commitment.
And according to recent research by Colliers International, the current level of rentals and capital values showed increases of between 5% and 18% across the Metropolitan area, during the last financial year. [Read more…]
The mid-year report from the Property Council of Australia (PCA) has confirmed a tightening of all major Office markets — except for Sydney and the Gold Coast.
As you can see from the graph, Sydney’s vacancy rate actually increased from 8.3% to 9.3% during the six months to July 2011.
For the remainder of Australia’s office markets, there was an overall improvement — as demand for space exceeded supply, and yields began to firm.
According to Peter Verwer (PCA’s chief executive): “This is a good result, especially now with a lot of uncertainty about Australia’s economic resilience … demand and absorption are well above the historical average, except for the orphan Sydney.”
From this second graph, you will also notice that the Melbourne Office market has been consistently outgrowing Sydney, since about July 2004.
Furthermore, because of Sydney’s heavy dependence upon the financial sector … this growth trend is unlikely to change any time soon.
Melbourne, on the other hand, has its Office demand spread across a wide number of sectors. And therefore, has been far less exposed to the recent global turmoil.
Bottom Line: Despite all the stock market gloom, the underlying fundamentals for Commercial property are strong — particularly in Melbourne.
And historically, it is in times like these when shrewd investors have laid the foundation for their extraordinary fortunes in Commercial property.
The RBA appears to be performing a rather fine balancing act.
Its Board knows rising inflation is about to emerge. And this is only temporarily masked by a poor March quarter, following the nation’s flooding earlier in the year. [Read more…]
YOU WOULD no doubt be aware of the benefits of “Negative Gearing”. But most investors have a very poor understanding of how much more money Depreciation can actually put back into your pocket.
Even if the Commercial property you plan to purchase might not be brand-new … you are able to “up value” the various components within the building, to reflect their actual current-day value.
By doing that, you are then in a position re-depreciate them, and gain the maximum tax benefit for your bottom-line. [Read more…]
Size-wise, as a proportion of Australia’s economy … Manufacturing and Mining contribute more or less the same output.
However, Mining’s investment spend is currently more than three times that being spent by the Manufacturing sector.
All the media attention has mainly been focused upon this disparity. But that doesn’t really tell you the complete story — as you can see from the first of these graphs. [Read more…]
Yesterday, the Reserve Bank left the cash rate unchanged at 4.75%. And these graphs will help to explain their current dilemma.
For the time being, the RBA’s focus is upon “inflation excluding volatile items” — mainly because of the various natural disasters, both here and overseas. [Read more…]
Around Australia, Commercial clearance rates at auction are now about on par with Residential property — averaging at around 50%.
Victoria seems to be leading the way, with Commercial clearance rates for some types of property approaching 70%.
New South Wales is running about six months behind at? around 60%, with firming yields. And Queensland is probably a further 12 to 18 months away in its recovery. [Read more…]
