Multi-speed economy affects investor fortunes
Dealing with a divergent growth outlook has been identified as the top issue of interest for property investors in a new report by DEXUS Research.
The DEXUS report, ‘Leading Insight: Big Issues For Real Estate Investors in 2015′, focuses on eight issues that have a “big bearing on investors’ fortunes”, with the economy’s variable growth speeds taking the top spot.
“Australia is now experiencing a variable-speed economy as a declining terms of trade widens the gap in the short-term outlook between the slower mining-led states of WA and Queensland and the faster growth states of NSW and Victoria,” the report said.
Another theme covered in the research included the impact of falling commodity prices, with Peter Studley, DEXUS general manager of Research, noting they “will also have far-reaching effects on property markets most reliant on the resources sector”.
However, he added that over time a range of industries and property markets will feel the benefits of a lower dollar and lower petrol prices.
The flow of investment capital was also a key issue for property investors, with the report presaging that the “large flow of investment capital directed towards real estate is likely to continue in 2015, given falling interest rates and the attractiveness of Australian real estate to offshore sources”.
How investors price risk also featured, with DEXUS noting that prime stock has seen significant value gains over the past two years, which has led to a pronounced tightening of yields.
“To date, investors have been willing to pay a premium to minimise risk, bidding up on assets with secure cash flows. This means that relative value is now more likely to be found in assets with cash flow risk, secondary assets and non-CBD assets,” the report said.
Meanwhile, DEXUS believes Australia’s macro settings are growing more positive for the retail sector – lower petrol prices are expected to boost consumer sentiment and spending.
On the housing markets, DEXUS pointed to low interest rates contributing to its growing support, but said, ” it is realistic to expect the rate of price growth to taper as affordability declines and supply levels rise”.