The residential property market in major capital cities including Sydney, Melbourne and Brisbane is set for a moderate pickup next year, the latest survey shows.
While recovery will continue in the commercial and industrial property sectors, however, conditions in the retail sector will continue to languish.
The latest Australian Property Institute (API) survey of more than 30 industry players suggests the residential property markets in Sydney, Melbourne and Brisbane have stalled near the bottom of the cycle, and that moderate capital value gains at best are anticipated over the next two years.
API NSW Vice President Tyrone Hodge says that, despite suffering from a shortage of supply which has been largely attributed to onerous planning requirements, Sydney has shown negligible growth over the past seven years and was unlikely to improve over the next two years due to a lack of affordability.
Retail property, however, was a different story as demand for retail space continues to suffer from weak retail sales and increasing competition from online shopping. Survey participants indicated they did not expect any recovery in returns until at least 2014.
Hodge says the retail sector will have to adjust as Australians do more shopping online.
“Retail building owners will really need to start to think about how they fund those retail businesses and the smart operators will be those that can change their tenancy mix,” he says.
On the bright side, however, survey participants indicated that market values and market rentals for commercial property in Brisbane would increase in the next 12 months while smaller increases were expected in Sydney and Melbourne. Survey participants also expected strengthening conditions in industrial property.