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Australia’s property industry faces a downturn not
seen in 30 years, and that means property developers should be taking measures
now to protect themselves, warns a new report from Ernst and Young (EY) Australia.
"Australia’s economic fundamentals are strong after 28 years of uninterrupted growth. The nation’s GDP growth currently sits at 3.4%, inflation at 2.1% and unemployment below 5.5%. Investment in infrastructure and dwellings remains high, supported by a large pipeline of work," EY says.
"However, there are clear signs the residential market is slowing. "CoreLogic’s mid-September
update finds house prices have fallen by 5.9% in Sydney and by 2.5% in Melbourne.
 With home price falls in those cities now beginning to
be mirrored in smaller housing markets, EY says the outlook for developers
is uncertain, particularly at a time when lending standards have been strengthened compared to periods in the past.
"Unlike previous downturns, interest rates look set to remain low. While we don’t envisage a crash, it has become much harder for homebuyers and developers to secure finance," said Richard Bowman, Real Estate Partner at EY
Australia. "Such a scenario may deter existing and future investors from continuing to invest in these types of projects. Capital starvation will lead to distress and likely destruction of value on those projects,"
the report says.
Recently refurbished, this low maintenance one bedroom unit
shows stable returns each year and the central location of this complex is sure to protect your capital.
Hinting of quieter times are the seven good size bedrooms located in the ever so popular Logandale Estate.
You will love the main bedroom! It comes with a private ensuite and walk-in robe.
If you need space for two families and the potential
to build a granny flat in the backyard later on, then this could be the
perfect property for you. This property features
a fantastic duel living style hi-set located on a massive 890sqm with plenty of side access to allow a driveway for a granny flat.
Upstairs is your typical 3 bedroom Queensland hi-set with a massive rear deck and air-conditioning.
Downstairs is renovated with its own kitchen and bathroom with an adjacent dining and lounge.
Located in the prestigious Solander area of Port Douglas and just a short
stroll to Four Mile Beach is the Shankara Beach House.
This spacious one storey home offers 4 large bedrooms plus a study along with 3
renovated bathrooms. Modern tiling throughout and 2 large
living spaces surround a well appointed central kitchen capable of servicing all areas.
Designed with the tropics in mind, Shankara Beach House is built around the fully tiled, generous sized, tropical in ground pool.
Add to this the ample alfresco entertaining areas and this home really is sure to
impress.
Located on top level of the perfectly positioned Allegro apartment complex.
The kitchenette is fully equipped with crisp white cabinetry and stainless steel appliances.
Sliding doors lead out to the balcony which has a birds-eye view of surrounding
South Brisbane. This is a total family package. Two separate Cottages
that come together on a large covered timber deck.
The main dwelling has 4 Bedrooms plus office, timber floors, modern kitchen, dining
on the north, wood heater in lounge, solar hot water
Apartments for Sale or Rent, Houses for Rent or Sale, Commercial Real Estate
Property Listings, Vacation Rentals, Villa Property it won’t
be a shock as severe as the GFC. However, we do expect investors to
be more cautious with investment decisions due to the economic uncertainty and, therefore, will want a larger
spread to bonds for the risk taken on. Risk spreads
on US high-yield corporate debt increased over H2 2018 and we regard this as a bellwether for global
risk appetite. Australian property markets are rarely synchronous.
Whilst New South Wales and Victoria have been performing strongly
in the last few years, Western Australia and Queensland
were on the receiving end of a significant economic downturn and the property sector has not been immune.
However, with both economies showing signs of life the
property market has started to pick up and investors have been taking note.
Similarly, Brisbane is experiencing a resurgence in the
economy that is translating into positive movement in the property sector.
Investors recognise that Brisbane’s outlook has turned more favourable than in recent times and that it represents good value
for money compared to Sydney and Melbourne. This
positive momentum isn’t limited to the office
market as both the retail and industrial sectors in these cities are expected to see stronger investor demand as they rebound from
sluggish years.
Figure 12 shows the expected five-year total returns
across sectors for the major markets. Ostensibly returns presented may seem low,
but we expect that in five years’ time yields will have softened.
Figure 12 attempts to demonstrate that markets such as Sydney and Melbourne are approaching the very top of their respective cycles and any asset purchased now is not
expected to perform as strongly as in recent years.
Whilst news for the Sydney economy remains broadly positive, being a global gateway city
it tends to be more adversely
affected by global economic slowdowns. Moreover, rent growth tends to revert to long-term trends over time,
and given that Sydney’s office rents have grown at an extraordinary rate
over recent years, we expect some pullback when the demand/supply imbalance improves.
Timing and location of any acquisition is crucial but so too
is asset selection.
Adelaide industrial, for example, is expected to be one of the standout performers over the next five years as significant investment is poured into the defence sector and
this trickles down into the local industrial economy.
In recent times bricks and mortar retail has been under pressure due
to reasons such as online retailing, increasing cost pressures and a decline in retail spending.
However, this also represents significant opportunities for investors to acquire relatively inexpensive assets and
reposition them. Neighbourhood shopping centres
have been in hot demand and this is reflected in their pricing, and there
have been limited buying opportunities. A potential headwind for property acquisitions in 2019 is the availability and cost of debt.
 The ‘Big Four’ banks in Australia have been under increasing pressure to tighten up their lending practices across all property sectors, not just residential.
As such they have been going down a deleveraging path and reducing their balance sheet exposure to property and also increasing the cost of borrowing for commercial real estate.
Chart 13 illustrates the average best lending rate available and the average yield for commercial property in Sydney.
The chart shows that property yields have been compressing for a number of years and so too has the cost of debt, but now that banks are
increasing lending rates the spreads are converging, squeezing investor margins.
Opportunistic ‘alternative’ lending sources are typically costlier than banks; however, in general there is little (if any) difference in margins from institutional
lenders and banks. We expect in 2019 that banks’ share of lending
within commercial property sectors will gradually
decline but this won’t increase lending rates in addition to
any further increases imposed by banks.
Grit Property Group offers a variety of Australian Investment Properties
from Melbourne, Sydney, Perth, Brisbane and Adelaide as well as overseas properties catered towards investors globally.
Property investment in Australia has been a successful, proven and a stable investment option for many investors worldwide and
it will continue to be so for the next few decades
to cater to the ever increasing population growth. Our property
stock consists of over 5000 Houses, Apartments and Town houses for
sale in the major cities in Australia and for any requirement of an investor, we will have a property from a suitable location in Australia.
For each property, an investment plan can be sent out
to each investor upon request which outlines the payment plans, return on investment and all costs involved.
Australian Property investment has been successful for many investors in creating wealth and the team at Grit Property would love to help the investors locally and globally to achieve their property investment goals.
Australian Property investment is a step you take towards a stable future as property
investment trends are predicted to continue its upward journey for the
next few decades to come. When it comes to Australia investment properties you can be certain that they will
only increase in value over time, offering you a significant return on investment.
It is a great time to invest in Australia properties and the time is
right for you to reap the benefits of this
booming and stable market. |
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