Office, Retail, Hotel Property In High Demand: NAB

Investment sentiment is stable with CBD hotels, office and retail properties in the highest quartile of demand for the first quarter of calendar 2016, but accessing credit is becoming harder for property developers, with debt and equity funding conditions remaining tough according to the NAB quarterly Australian Commercial Property Survey.

NAB chief economist Alan Oster told The Sydney Morning Herald more developers said their debt and equity funding situation had worsened over the quarter, while the average pre-commitment requirement to get projects up and running rose for the fourth straight quarter to 54 per cent.

“Property professionals in the CBD hotels sector are also the most confident in the next year, followed by office and retail. However, confidence levels are broadly similar across all market sector participants in two years’ time," Mr. Oster said.

SMH reported that Cushman and Wakefield said land claimed by infrastructure projects and residential development is pointing to eight per cent forecasted rent rises.

The survey said developers are looking to enter the market in the near term – around 50% plan to start new works in the next six months, down from 52% in Q4 and 58% a year ago.

“Significantly, for developers intending to start new projects, a survey low 38% indicated they were targeting residential developments, down from 54% in Q4, presumably reflecting the over build in apartment markets,” said Mr Oster.

The survey also shows that funding issues may have had an adverse impact on their development plans.

The survey found residential construction firms recorded a notable decline in confidence amid Reserve Bank warnings about the unprecedented levels of new apartment supply entering the market.

According to the NAB, sentiment improved in most states, led by NSW, but remained strongest in Victoria. Sentiment improved in Queensland and SA/NT, but fell to a new survey low in WA.

Image: NAB[/caption]Despite views earlier this year that conditions in the housing market would weaken in 2016, sentiment is tipped to improve in the years ahead, according to the survey.

NAB notes the expectations for residential housing price growth over the next year were broadly unchanged, although there were notable differences across all states and territories.

Expectations for price growth improved most in Victoria (1.7%) and are now highest in the country.

They also improved in SA/NT, but remain weak (-0.1%). Expectations weakened a little in Queensland (1.2%) and were also revised down in NSW (-0.2%) and WA (1%), said the NAB.

Looking further ahead, respondents indicated that house prices were likely to grow in most states in 2 years time, led by modest gains in Victoria and Queensland (1.4%).

Recipients to the NAB survey say in leasing markets, office rents are expected to grow 1.1 per cent and 1.5 per cent, nationally in the next one to two years, led by solid returns in NSW and to a lesser extent Victoria.

270 panelists participated in the March quarter survey and considered views from real estate agents, developers, fund managers and housing owners and investors.