Investor confidence in the Australian commercial property market plunged in Q2 as the economy softened. The NAB Commercial Property Index dipped to minus 16, the third lowest level since the bank started keeping track in March 2010. This level represents the weakest level since December 2012. Offices were the hardest hit, with the index seeing the sharpest drop from the first quarter.
NAB’s business conditions gauge dropped to minus 8 from minus 4, which was a four-year low, in June. The combination of low interest rates and a slipping Australian dollar did not boost the country’s economy. The Reserve Bank of Australia, which has a goal of rebalancing the economy toward different industries, such as residential construction, as the mining investment boom lessens, recently cut its benchmark rate by a quarter percentage point to a record-low level of 2.5 per cent.
The NAB report stated that consumer confidence is still the main stumbling block facing property business. With the economy growing at its slowest rate in nearly two years, the impact of structural change is becoming “increasingly apparent.”
Values and rents of retail, office, and industrial properties dropped in Q2, according to figures released in the report. Capital and rental growth were also lower than expected.
According to the survey, the outlook for the retail property market is gloomy for investors. An oversupply of property is expected to persist until 2016. Three hundred property industry participants took part in the June quarter commercial property market survey.
The sentiment was negative in all parts of the country in the second quarter, with the exception of Western Australia. This state still recorded a drop in state index from 10 to 0 points.
Results were most positive in Queensland (up 28 to -5 points) and New South Wales (up 3 to -26 points) but fell sharply in Victoria (-50 points) and South Australia/Northern Territory (-50 points).
Perspective about the market is expected to improve in all states in the next 12 months, with Queensland coming out on top(+18 points), followed by Western Australia (+8 points) and New South Wales (+8 points).
