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Market Watch: Commercial property set for boom in 2015

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Commercial property set for boom in 2015
Analysts are forecasting a good year ahead for the commercial property sector with investment set to match the highs of last year. Foreign investors are set to increase their spending in Australia with low interest rates generating more interest together with the value of the dollar. Matt Whitby of Knight Frank told the Sydney Morning Herald that volumes in the last two years have been about 70 per cent above that of the 2007 peak.

Investors dominated home loans last year
Home loans arranged by investors accounted for more than twice those for owner-occupiers. New data from the Australian Prudential Regulation Authority shows that owner-occupiers took on $851 billion of new mortgages in 2014, that’s a 5 per cent rise on the previous year. Meanwhile home loans for investors grew 11.5 per cent in the same period to $454.7 billion. That’s good news for lenders who charge higher rates for around the same risk. The regulator has already been pushing lenders to reduce their exposure to investor loans and these new figures will intensify those calls. The housing market accounts for 72 per cent of all bank lending currently, eclipsing business, cars and credit cards.


Prices likely to increase in the months to come
The low rate of the Australian dollar will mean some tough choices being made by businesses in 2015. Forecasts show that household budgets will be squeezed by price rises in the first few months of the year, with a third of businesses polled in the Dun and Bradstreet Monthly Business Expectations Survey saying they are likely to increase costs. Wholesalers will pass on costs to retailers and although some may be able to absorb costs, others will pass them on to consumers. It’s always prudent to allow a little ‘wriggle room’ in your budget when calculating home loan repayments to allow for unavoidable changes to household budgets.

 

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