What will moderating growth mean for property?
Dexus Research today released the Australian Real Estate Quarterly Review Q2 2019.
The report describes how Australia’s main office property markets are well-positioned given the prospect of moderating growth in the economy.
Recent data points to moderating growth for the Australian economy driven by a softening housing market and a downward revision to the global growth outlook.
Business and consumer confidence have dipped in recent months. However, there are signs which should help support occupier demand. Significantly, business conditions are above average and employment growth is positive.
Supporting future GDP growth is growth in public spending, including infrastructure and population growth.
Office fundamentals are robust. Vacancy rates in the Sydney and Melbourne CBDs are now at 3.7%, the lowest level in around 30 years, while vacancy rates in Brisbane and Perth continue to fall.
Moderating growth is likely to mean interest rates staying lower for longer.
A recent fall in interest yields in Australia is likely to increase demand for high quality income-producing office properties. The office yield spread over bonds in Sydney CBD remains at historically wide levels at 280 basis points.
Office property values are expected to be supported by strong investment demand from superannuation funds and foreign investors.