Property values to fall further
A property research expert has provided an outlook for the investment property market in 2009, predicting valuations will fall further on the back of slowing tenant demand and falling rent levels.
Dugald Higgins, associate director of Property Investment Research, said while the Australian property market has in recent years been supported by strong property and economic fundamentals, “the tide is on the turn”.
Higgins listed problems such as rising unemployment and slowing economic growth as two risks to the property market, with low vacancy rates and strong rental growth giving way to declining rents.
In addition, “at this point, the market is somewhat hampered by a lack of transactions to accurately gauge how much values are declining”.
Higgins said based on Knight Frank information, values have fallen in the past six month by approximately 8 per cent, with prime grade assets falling 13 per cent and secondary grade assets falling between 13 and 17 per cent.
There are also further downside risks, Higgins said.
“Firstly, we are still only really entering the squeeze, real estate fundamentals do not respond as quickly as equities (although they are being priced into the Australian real estate investment trust market) and secondly, the lack of transactional evidence hampers calculations.”
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