NAB commercial property index deteriorates

NAB’s quarterly commercial property survey continued to deteriorate in the September quarter, not that you’d know it from A-REIT prices:

NAB Commercial Property Index hits new low of -19 points in Q3’12 as domestic economy passes through a soft patch with business conditions weaker and forward indicators concerning. Retail participants least optimistic, but expectations soften most in office and CBD Hotel markets. WA strongest market nationally. Victoria weakest with less property professionals expecting positive capital or income returns in office and retail markets. Consumer confidence seen as the main challenge for property firms in the next year.

Full report below.

Commercial Property Survey _September 2012

David Llewellyn-Smith
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  1. I have to admit being surprised by the strength of property fund units within Super.

    Are units being priced on comparative yield by retail investors as interest rates wash off?

    Or is it that the unit prices have increased mainly after the midpoint of the quarter to which the report refers?

  2. “Property professionals saw national capital values falling in all sectors in Q3’12, with values down most for retail. CBD hotels enjoy strongest outlook (1.8% by Q3’13 and 3.8% by Q3’14). Industrial values to rise 1.3% and 2.8% in next 1-2 years respectively. Office values also rise 0.4% in next year and 1.8% by Q3’14. Retail participants least optimistic with values expected to fall -1% in next year and -0.2% in next 2 years.”

    All rises well below the RBA’s mandated inflation target of 2-3 per cent. Looks like losses ahead.

    • Maybe, maybe not. Holders of these properties generally enjoy quite good returns on their investment.

      The REIT’s hold a better class of property, and they take tenants on 5 year lease terms with guarantees, so rental volatility is minimal.

      Annual rent increases are built into the lease. There are quite a few opportunities for those who know what they are doing, but I suggest that most people stay away from them.

    • That refers to loans to developers mav, not the end buyers of the property. Regretfully this will in time only further restrict supply.

      You really need to slow down and read things properly.

    • After having read the article again, I concede that it is ambiguous. I still lean towards developers, but it is possible it means commercial property, which of course only means less funding for commerce and business if the LVR’s are further reduced or interest rates increased.