The property market is patchy across the states, with considerable discussion about the impact of investors in the market according to a recent ANZ Bank report.
The report gives feedback from a range of companies working in the property space spoken to by the ANZ and suggests that activity continues to be concentrated in major capital cities, with lacklustre activity in regional areas:
On the construction outlook:
It looks like the planned construction pipeline is easing.
There are also concern about the implications of a growth slowdown in China on foreign investor demand for new housing in Australia.
Interestingly, there was an emerging view among Victorian corporates that property market conditions in Melbourne are more robust than in Sydney.
Price growth in Melbourne is seen as more sustainable, and expected to be supported by solid population growth and immigration demand, particularly in the inner city and education hubs.
Indeed, there was some concern about the potential for tighter lending standards to prompt a sharp decline in investor sales, with little prospect of owner-occupier sales filling the hole (given that households remain cautious about increasing debt/leverage and first home buyers are struggling to enter the market).
One Sydney contact noted ferocious investor appetite for direct property investment.
Importantly, anecdotes suggest that strong housing activity in Melbourne is extending beyond the city centre.
Generally there is a more optimistic outlook for inner suburbs, and a growing sense of caution towards the CBD apartment market.
Similarly, a developer in Queensland noted that capacity constraints were emerging as a result of the pick-up in activity.
There were even reports that investor capital is shifting from Sydney to Melbourne and Brisbane, to reflect the better price growth outlook:
In terms of commercial property:
Investors continue to be attracted by elevated yields (in a low interest rate world), although there remains a focus on long leases and stable tenants.
Leasing conditions in industrial warehouse/distribution property were seen as stable-to-solid, and there is a moderately positive outlook for retail property.
Some noted strong demand from the services sector – in particular health, cafes, and personal services.
Interestingly, we heard reports of interest from SMSFs for commercial property.
Overall, the market remains patchy and there is a strong emphasis on a good tenant mix and location.
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