Boosted business confidence will prop up property market in 2016

by Julia Corderoy14 Dec 2015
Elevated business confidence will continue to have a positive effect on Australian property in 2016, a commercial real estate giant has said. 

The latest monthly business survey from National Australia Bank (NAB) revealed that business conditions index rose from 9.8 to 10.2 points in November and the business confidence index rose from 2.8 points to 4.8 points.

John Kenny, CEO Australia and New Zealand at Colliers International says boosted business conditions will spill over into the housing market.

“We have experienced a sustained increase in business confidence over the past twleve months,” he said.

“This confidence is having a positive impact across the property sector, and this optimism is starting to flow through to several of our occupier markets, as businesses become more confident in leasing office space.”

According to Kenny, the Sydney CBD office market has experienced improving conditions since early 2015, with a significant decline in vacancy over the year. 

This run is expected to continue to spread to other markets with Melbourne CBD office, Sydney industrial and national neighbourhood and large format centres likely to experience particularly strong demand conditions in the year ahead.

In addition, the national director of research at Colliers International, Nerida Conisbee, said consistently positive consumer confidence levels are another contributing factor in the overall strong performance of the property sector. 

“The strong residential housing market, increasing consumer confidence and the lower Australian dollar are all factors that have contributed to the current state of our economy,” Conisbee said.

“Right now, Australian interest rates remain stable at their historic low of 2%. Nevertheless, the Reserve Bank continues to suggest that it is not averse to cutting rates and is waiting on key economic releases post-Christmas. 

“For now, although GDP growth remains below average, business surveys suggest that the services sector will continue to improve which will support the Victorian and New South Wales economies in particular.”

According to Conisbee, all of these factors have made Australia a very attractive destination for offshore capital, which will likely continue into 2016.

Data from Colliers reveals investment in Australian commercial property in 2015 is set to reach $35 billion, of which domestic purchasers account for around half. 

However, Australian investors are now increasingly moving offshore, spending approximately $5 billion overseas in 2015.  This is more than double the 2014 level but significantly lower than the almost $28 billion in 2007 when Australian investors were the third highest offshore investors in the world.