Retail property on the rise, but a hard slog for industrial sector

A recent survey by Australian Property Institute (API) New South Wales Division has found that property experts still expect growth in retail property in Australia’s three major cities, thanks to buoyant consumer confidence.

However, respondents in the half yearly Australian Property Directions Survey saw industrial property in these cites as likely to come off the boil.

API's NSW President Michael Collins says the comparison of property classes over the next three years within each city - not a comparison between cities - shows that the industrial sector in Sydney, Melbourne, Brisbane, Perth and Canberra is expected to be the worst performer.

He adds that the Sydney commercial property "clock" is seen as being near its zenith, but that for Melbourne and Brisbane is regarded as being in the upward stage of the property cycle.

The survey measured the sentiment and expectations of valuers, fund managers and property analysts at 30 leading groups.

It found that business confidence in the property industry has improved sharply over the last six months.

Indeed, 90 per cent of the respondents believed business confidence would be steady or rise for at least the next 12 months. This compares with only 12.5 per cent in the previous sentiment survey last September.

Collins attributes the improvement to low levels of inflation and interest rates, as well as to growth in investment fund pools and Olympics preparations.

As a result, he expects strong demand for good quality property from the major institutional investors over the next 12 months.

He adds that respondents generally expected inflation to remain at its current level over the next 12 months, but were slightly more pessimistic over the longer term. Indeed, 70 per cent saw inflation rising in three years time compared with 60.9 per cent last September.

The number of respondents expecting interest rates to increase in three to five years time jumped to 76.7 per cent, from 63.6 per cent in September.

Sentiment towards foreign investment also changed significantly, with 76.7 per cent expecting it remain steady or to rise in the next six to 12 months, compared to only 28 per cent six months ago when investors were still jittery about Asia.