Property market recovery not likely until 2011: Survey

The residential property market will begin to recover next year, but the outlook for commercial property is worse than anticipated, a new survey reveals.

The Australian Property Institute’s Australian Property Directions survey has shown that the fall in industry sentiment over the past six months in Sydney, Melbourne and Brisbane is the largest in the survey’s history.

API NSW president Robert Hecek says that the property market is suffering worse than feared.

“From all our indications it’s just turned out to be a bit more pessimistic than expected. It’s certainly showing the three property areas won’t be showing any improvements until 2011. The only brighter side is residential … that’ll bottom out in 2010 and will pick up in 2011.”

The survey shows that 82% of respondents said the Federal Government’s stimulus for home owners will help residential markets, while 76% felt retail property will also benefit.   

“The Government stimulus has certainly helped, and in some instances that has pushed the market along; but then Sydney has had a long period of downswing and now it’s just starting to scrape along the bottom.”

Hecek says that commercial and industrial property is where the damage is really being felt, and that markets in Sydney, Melbourne and Brisbane have recorded “significant downswings” in sentiment.

The survey shows that 68% of respondents believe a non-residential property recovery in three years is unlikely.

“In commercial property there’s no change until 2011. At the present cycle in 2010 the Melbourne and Brisbane market will be right at the bottom of the cycle, with Sydney still lagging a bit.

“In the retail and commercial areas, all cities are on the downswing in 2010, and in 2011 they’re showing a swing upwards.”

Hecek says that commercial property lease incentives are also on the way up, with the majority of respondents claiming lease incentives for prime, A grade and lower grade properties in Sydney are in the 20% to 29% range.

“That’s quite a strong sign because that shows that the market is finding it difficult to lease properties, and incentives are the main way to get tenants in,” he says.

Hecek says unless the Government provides some more stimulus for property markets, then values will continue to decline until 2011 at the earliest.

“We were hoping to see improvements in 2010 but that doesn’t look likely. The budget is going to be obviously giving more points to infrastructure…but if it goes to property sectors, that is uncertain,” he says.

“The other fact that is underlying is the unemployment factor, and there certainly doesn’t seem to be clear indications as to where that’ll end up.”

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