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Boston, MA -- (SBWIRE) -- 07/16/2012 -- The Australian commercial real estate market continues to be fairly balanced because, structurally, the industry functions in a way that restricts over-development. It operates in an economy that, despite weak consumer sentiment and structural changes, is performing reasonably well. The economy and sector are underpinned by resources and demand from China, a reducing threat of interest rate rises, low unemployment and a strong infrastructure sector. We caution, however, that our outlook for the economy in 2012 is bearish, and the country will be negatively affected by the expected slowdown in Chinese economic growth.
Having consulted our in-country sources in December 2011, we can confirm that whilst rents in some regions experienced strong growth, it seems our view for a slowdown in Australia's economic growth has already started to play out.
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National Australia Bank's commercial property survey for Q311 described the short-term outlook for retail property as subdued and forecast to remain negative through much of 2012.
Property services firm CB Richard Ellis has said that it detects the long-awaited emergence of Chinese investors into the direct Australian commercial property markets.
Treasurer Wayne Swan has said the IMF's annual report on Australia's economy is a strong endorsement of the government. It said the economy's performance since the onset of the global financial crisis has been enviable.
Some of the key opportunities in the real estate market include:
- There is a resources boom in Australia at present, built significantly but not entirely on exports to China. This is putting money into the economy and bolstering downstream industries.
- Following the global financial crisis most Australian REITs have deleveraged to a large degree and now have capacity, by way of undrawn facilities among other measures, to invest as opportunities arise.
- The Australian commercial real estate market continues to be fairly balanced because, structurally, the industry operates in a way that restricts over-development. Careful bank lending policies meant that when demand for space dropped off in 2008 and 2009 there was not suddenly a glut of vacant property.
- The natural disasters in Queensland at the beginning of 2011 are providing a significant lift in the level of work for the construction industry and businesses that supply the industry. Also, monetary policy will be kept accommodative in order to drive the post-disaster recovery efforts, although the effects of this will taper off as work is completed.
The Australian economy is in essentially sound shape.
Some key risks to the current real estate market are:
- Weaker-than-expected growth in China would lead to weaker economic performance for Australia, given that Chinese demand is the largest driver for Australian exports, including coal and iron ore.
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