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REINSW President Steve Martin's Property Outlook
Much has been said about the global financial crisis and the effect on the Australian economy. There seems to be little doubt that the US and other countries are facing enormous economic challenges in a bid to correct some poor judgment and decisions that have been made. Australia is not extinct from our own challenges however it appears by comparison that we are better placed to confront and implement our recovery strategies. So how does all this affect our NSW property market?
The Reserve Bank and the Federal Government’s initiative to increase the First Home Buyer’s Grant has re-energized the residential market. With more than 85 000 first home owner grants (approved in 2008 – and a high percentage taking place in the last quarter of the 2008) clearly demonstrates that the increased incentives provided by the government and the significant reductions in interest rates, has created increased first home buyer activity. As a direct result of this buyer activity it has underpinned the NSW residential market. With interest rates continuing to fall, I see greater buying activity that will filter through from the lower priced property (first home category) to the mid range over the next three to six months. What we are now seeing as a direct result of interest rates and the rental accommodation shortage is that investors are coming back into the market place. This is having a twofold effect:
- Providing more rental accommodation for tenants
- Creating additional buyer demand which is adding to the stimulus in the residential market
With interest rates likely to continue to fall, we will see the “Mums and Dads” and private investors playing a significant role in our residential recovery.
At a time when investors are assessing where their funds are best suited, it appears that property may well benefit from the global financial crisis. In terms of borrowing conditions and subsequent return, the commercial market stacks up very well. The astute investor is now coming back to property and sees 2009 as a year of great buying opportunity albeit with an element of risk. Strength of tenancy is the risk factor and will come under close scrutiny from buyers. Multi tenancy properties where risk can be spread, together with government leased properties, will become sought after and will be reflected in the yield and prices that will be achieved.
Green rating of buildings will also come under scrutiny and become an important consideration in a purchaser’s buying criteria. Good, well located, well leased properties will enjoy good but cautious demand. 2009 will see a clear delineation of “A” grade and “B” grade properties with pressure on the “B” grade with the risk factor reflecting in yields and prices. The anticipated downturn in the retail sector will put pressure on rentals and we can anticipate rental corrections taking place through the course of 2009. Lower interest rates will create opportunities for the owner /occupier of commercial and industrial properties where it could well be their financial commitment to a mortgage will be lower as an owner than it would be as a tenant.
In summary, the residential market will benefit form lower interest rates and buyers’ desire to own their own home. Good commercial and industrial investment property that is well let and will enjoy buyer demand. With lower interest rates predicted, this will lead to increased buyer demand for good, well credentialed property.
Please direct media inquiries to Julian Brophy on 0408 276 749.
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