- Signs of confidence says major players in the commercial real estate industry
- Increased house prices and rents excepted across the Perth market
- Competition from lenders expected
As we leave 2021 behind us and start 2022, we realise that Covid-19 is still a hot topic during many conversations.
It might be with our business associates, friends, family, or interstate and overseas connections.
We are often still discussing and comparing how the various governments are managing the ongoing pandemic.
In this article, I investigate the predictions made by various stakeholders across the $9-trillion dollar real estate industry in what is set to be another disruptive year.
Commercial real estate
Here are my predictions for the commercial real estate industry in Perth, which I specialise in.
We had seen small signs of recovery at the start of 2020, followed by a “frozen” market in the second quarter, as I like to call it.
During April, May and June 2020, it seemed like everybody was monitoring the market as we saw Covid-19 regulations, acts, codes, and restrictions being introduced.
This was something that nobody alive had ever seen during their lifetime, so we collectively stepped back and watched what would happen next.
Surprisingly enough, the still-fragile recovery did not crumble. In fact, in the second half of 2020, we have seen a powerful movement on commercial stock here in Perth, leading to a tight market as we entered into 2021.
The commercial sales market remained stable with occasionally seeing a property settling. In 2021 we saw commercial rentals going up, and the rental market remained tight as the available stock was limited.
Sales and Marketing Coordinator of Cirrus8, Annabelle Newton, surveyed to capture the views of business owners, principals, licensees, and CFO/CEOs from around Australia in December 2021.
“The results showed that the future of commercial real estate is bright, with 91% of responding businesses feeling upbeat about the future. This sentiment is felt despite the impacts of COVID-19, where 33% report experiencing no or low impact on revenue. 73% Expect the effects of COVID-19 to continue,” Ms Newton summarised.
The report also gathered some views on the income stream of real estate agencies.
“Property management income has increased the most (though sales and leasing income have also seen an increase) over the past year, with 88% of respondents reporting an increase,” Ms Newton continued.
Finally, the survey also reviewed the job market, which confirmed the feeling of many job hunters or hiring managers who are currently looking for qualified commercial property managers or have done so over the course of 2021.
“Despite the clear necessity for commercial property managers, 100% of responding real estate businesses reported that it has been difficult to find qualified commercial property managers this year. 53% expect this to become more difficult in 2022.”
Managing Director at SVN Commercial Real Estate Advisors, Joseph Rapanaro, foresees that the commercial rents will continue to increase in 2022 when market reviews fall due and properties enter the market for lease.
“The industrial rental market should remain tight in 2022,” Mr Rapanaro explained, “and we will see more rental price increases over the next 12 months.
“Industrial properties will remain the sector of choice for many investors keeping yields at the current historically low levels.
“The performance of the retail and office sectors will be increasingly linked to the Covid-19 situation, including caseloads and border closures. The next few months will be very telling in this regard.”
REIWA optimistic about Perth residential market
In December 2021, REIWA predicted good things to happen in the housing market in 2022.
The institute is predicting house prices in Perth to increase by 10% in 2022, following the 14% growth recorded last year.
“Despite the strong price growth recorded in 2021, WA is still the most affordable state in the country for housing, and with prices in most regions across the state yet to catch up with their 2014-15 peaks,” noted REIWA President Damian Collins.
Investors interested as rents rise
Director of Soco Realty and fellow The Property Tribune contributor, Ashleigh Goodchild, mentioned to us that she sees a lot of interstate interest by investors.
“We are still waiting to see the local investor confidence to pick up. This will only drive the sales market further. Still, it should also mean we can see rental properties entering the market and becoming available for tenants, which should stabilise the asking rents across Perth,” Mrs Goodchild predicts.
“As soon as our borders open I feel that we will have another 12 months of a tight rental market for renters with rent prices increasing a bit further.”
Another critical factor that affects real estate is borrowing power and interest rates.
Currently, the interest rates are meagre.
With WA being very affordable compared to other Australian markets, real estate investment is an option many foreign, interstate, and local investors could consider.
The business owner of Loan Market Ellenbrook, Brett Richardson, told us that he believes things will change in 2022.
“2022 will continue to see growth in property values, with WA still being the most affordable city in the country,” Mr Richardson said.
“With the WA border opening in February and the shortage of both skilled and unskilled labour along with a shortage of rental accommodation, rent increases will continue.
“We will see an increase in the cash rate probably towards the second half of the year with increases to continue over the next 12 to 18 months. We should see fixed-rate stabilise in the first quarter of 2022.”
Brett Richardson, Loan Market Ellenbrook
Mr Richardson believes that the competition from the lenders will continue and offered some advice.
“You should review your current interest rate being offered from your current lender to see if they can offer you a better interest rate,” he advised.
As we can see, all our eyes are on 2022.
We expect great things to happen in WA this year.
However, uncertainties such as Covid-19 restrictions, potentially increased interest rates, border closures, tight employment markets, and the federal elections still make us curious to see what will happen in our industry this year. Time will tell.
The information within this article has either been provided to us directly from the sources, either upon request or freely provided to us for our use. Some information has been collected from the source’s website or socials, as it was publicly available.
The author of this article works for SVN.