Australian Retail Properties Expected to Lose Value on Sagging Confidence

Australian retail property values and rents are expected to fall over the coming year as slumping business sentiment and weak consumer confidence weighs on demand, a National Australia Bank Ltd. (NAB) survey showed.

Retail property values will lose 1.3 percent by September 2012, and rental returns will drop by 0.9 percent, the survey found. That compares with expectations of a 1 percent gain in office values and a flat outlook for industrial properties, according to the report.

“Consumer confidence is now seen as the biggest challenge facing property firms over the next year,” NAB said in the report. “With the global economic outlook having clearly deteriorated, global economic volatility is expected to have the biggest impact on businesses over the next year.”

The central bank sees scope to reduce the nation’s 4.75 percent interest rate, the developed world’s highest, as a weaker growth outlook and declining confidence eases inflation concerns, the Reserve Bank of Australia’s minutes of its Oct. 4 meeting released yesterday showed. NAB’s commercial property index, which measures capital value and rental pricing expectations in the real estate industry, fell to minus 13 in September, from minus 5 in June, the survey found.

To contact the reporter on this story: Nichola Saminather in Sydney at nsaminather1@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net