According to the latest RICS Global Commercial Property Survey, the pace of growth in the Australian commercial property market slowed in Q2. By contrast, the pace of improvement in the New Zealand market actually increased in Q2, with capital value expectations moving into positive territory. In spite of relatively strong economic backdrops, both countries have been hit by challenging natural disasters in the first half of this year which will have impacted on property markets to some extent. Nevertheless, the overall outlook for commercial real estate in Oceania remains relatively upbeat.
In New Zealand, the net balance of use of inducements and availability of property fell sharply into negative territory, to –13 in both categories (from +22 and +40 respectively). Occupier demand also edged up slightly, from +20 to +27. However, the shift in demand and supply has yet to feed through to rental values, and as such expectations remain downbeat; the net balance deteriorated further from -18 to -27.
Meanwhile, the investment market continues to grow steadily; the net balance of investment demand was virtually unchanged between Q1 and Q2 while investment expectations for Q3 are also upbeat, at +27.
Significantly, capital value expectations edged into positive territory for the first time since the series started as the net balance moved up from -18 to +7. The easing of monetary policy in March may have contributed to the improving outlook for the investment market.
In contrast, the tightening in policy by the Reserve Bank of Australia appears to be weighing down on sentiment for both investors and occupiers in Australia. Both sides of the market have been booming in recent quarters, but the most recent survey showed that increasing availability and declining growth in occupier demand at the headline level, combined with the higher cost of borrowing, are weakening the outlook for rents next quarter. Indeed, net balances in occupier demand, availability of property and use of inducements all hovered around 0 in Q2. Growth in investment demand and capital value expectations also eased in Q2 with the net balances falling to +5 and +13 respectively.