Australian Real Estate Quarterly Review Q3 2019

Australian office markets show a well-positioned state even under the face of uncertainty as being showcased by the reports released by Dexus on its Australian Real Estate Quarterly Review Q3 2019.

Employment growth displays a positive rate movement with 2.6% per annum which resulted from official cash rates reductions and fiscal stimulus from tax rebates. Occupier demand can possibly decline in the coming years due to the weakening of business confidence caused by US/China trade war and other related events. This case eventually lead vacancy plunge and lack of oversupply.

The economy continues to boom benefiting from population growth of 1.6% and a substantial infrastructure pipeline. The 10-year government bond yields will remain below 2%.

Investment activities doubled in the June quarter with a record of $7billion. Sharp falls and bond yields have fallen to 1.4% that contributed to the rate increase. Yield spread between sectors narrows to historical lows as industrial compresses further. Further, low interest rates likely to support investment demand for income-producing assets while foreign investment volume remains elevated.

On the other hand, A-REITs returned +19.3% in FY19, outperforming the boarder equity market. Investors have moved back into defensive assets on the back of heightened market volatility and a more cautious global backdrop. A-REIT pricing is being supported by falling bond yields. It fell down 100bps in the second half of FY19. 

Moreover, leading indicators point to a softening in office demand. Customers opted to consolidate and/or sublease excess space that led to decline in net absorption for a second consecutive quarter. A significant puck up in demand seems unlikely for FY20 with business confidence low and jobs ads down.

Australia’s industrial sector is in the midst of a significant transformation which is changing the shape of occupier demand and attracting significant investment. Prime rent growth continued in Sydney, ticked up in Brisbane, and remained flat in other markets. Records have noted the weakening of industrial supply across capital cities. The country’s retail turnover growth remains positive at around 3.1% per annum on a moving annual basis.

Article source: file:///C:/Users/RE221/Downloads/Australian%20Real%20Estate%20Quarterly%20Review%20Q3%202019.pdf

Image source: https://www.realestate.com.au


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