Homepage
PR Newswire
18-03-2015, 08:39 PM
Hot property prices a risk to stability, RBA warns
THE AUSTRALIAN MARCH 18, 2015 12:00AM
Greg Brown
Property Reporter
Sydney
Turi Condon
Property Editor
Sydney
THE Reserve Bank of Australia has issued its second warning in 12 months about emerging risks in the commercial property sector, with the board arguing that strong price rises were out of kilter with the tough leasing conditions facing parts of the sector.
In the RBA’s March minutes released yesterday, the board identifies commercial property as being an asset class that may pose a risk to Australia’s financial stability, along with the housing and mortgage markets.
“Members further noted that risks had been beginning to build in commercial property markets, including developers of residential as well as non-residential,” the board said.
“Prices in several market segments had been rising, even as vacancy rates remained high and leasing conditions weakened.”
This comes a year after the initial RBA warning, when it said that parts of the office market were at risk of an oversupply.
The latest figures released by the Property Council of Australia showed that empty space in capital city office buildings climbed to 11.2 per cent of the market at the end of January, up from 10 per cent in July.
A note by CLSA said the new wave of supply in the major Australian CBDs was excessive, with increased tenant demand not enough to offset the extra space. It estimates that Sydney CBD prime vacancy would increase from 8.7 per cent to 13.1 per cent by December 2017.
Dexus Property Group chief executive Darren Steinberg rejected the figures, arguing Sydney’s vacancy would fall to 6.5 per cent by 2018. He said that many of the buildings being withdrawn were prime or A-Grade properties, such as Gold Fields House in Sydney’s Circular Quay.
“On a global scale Australia’s commercial property markets remain very well priced, which is what is attracting offshore capital to Australia,” Mr Steinberg said.
Investa Office chief executive Campbell Hanan said Australian real estate was cheaper than most international markets.
“We are one of the few global markets where cap rates are still higher than they were in 2007 despite the fact that interest rates have halved over that same period,” Mr Hanan said.
Stockland chief executive Mark Steinert rejected there were broad warning signs for commercial or residential property.
Low interest rates and ongoing offshore interest would continue to underpin values for the foreseeable future, he said. “Residential developers will find it difficult to keep going at the current pace ... but that’s not suggesting there are problems,” he said.
THE AUSTRALIAN MARCH 18, 2015 12:00AM
Greg Brown
Property Reporter
Sydney
Turi Condon
Property Editor
Sydney
THE Reserve Bank of Australia has issued its second warning in 12 months about emerging risks in the commercial property sector, with the board arguing that strong price rises were out of kilter with the tough leasing conditions facing parts of the sector.
In the RBA’s March minutes released yesterday, the board identifies commercial property as being an asset class that may pose a risk to Australia’s financial stability, along with the housing and mortgage markets.
“Members further noted that risks had been beginning to build in commercial property markets, including developers of residential as well as non-residential,” the board said.
“Prices in several market segments had been rising, even as vacancy rates remained high and leasing conditions weakened.”
This comes a year after the initial RBA warning, when it said that parts of the office market were at risk of an oversupply.
The latest figures released by the Property Council of Australia showed that empty space in capital city office buildings climbed to 11.2 per cent of the market at the end of January, up from 10 per cent in July.
A note by CLSA said the new wave of supply in the major Australian CBDs was excessive, with increased tenant demand not enough to offset the extra space. It estimates that Sydney CBD prime vacancy would increase from 8.7 per cent to 13.1 per cent by December 2017.
Dexus Property Group chief executive Darren Steinberg rejected the figures, arguing Sydney’s vacancy would fall to 6.5 per cent by 2018. He said that many of the buildings being withdrawn were prime or A-Grade properties, such as Gold Fields House in Sydney’s Circular Quay.
“On a global scale Australia’s commercial property markets remain very well priced, which is what is attracting offshore capital to Australia,” Mr Steinberg said.
Investa Office chief executive Campbell Hanan said Australian real estate was cheaper than most international markets.
“We are one of the few global markets where cap rates are still higher than they were in 2007 despite the fact that interest rates have halved over that same period,” Mr Hanan said.
Stockland chief executive Mark Steinert rejected there were broad warning signs for commercial or residential property.
Low interest rates and ongoing offshore interest would continue to underpin values for the foreseeable future, he said. “Residential developers will find it difficult to keep going at the current pace ... but that’s not suggesting there are problems,” he said.