Australian commercial property sales plunged by 33 percent in the fourth quarter of 2012, as uncertainty about the nation’s economy kept a lid on transactions, according to CBRE Group Inc.
The value of retail, office and industrial property sales slid to less than A$2.9 billion ($3.1 billion) in the three months to Dec. 31, from A$4.3 billion a year earlier, the Los Angeles-based broker said in an e-mailed release.
Australia’s services and manufacturing industries contracted in December, as a strong local currency, consumer caution and poor sentiment weighed on households. The uncertainty also led to an unexpected decline in retail sales in November for the first time in four months and a drop in home loan approvals in November even after 1.75 percentage points of interest rate cuts since November 2011 by the central bank.
“The underlying level of transactions softened in the second half of 2012,” Stephen McNabb, Sydney-based head of Australian research at CBRE, said in the release. “Mixed and sub-trend economic growth evidence, combined with subdued levels of consumer and business confidence, have held back growth assumptions and hence valuations.”
Sales of office buildings fared the worst in 2012, dropping by 12 percent, while retail property transactions jumped 24 percent and industrial 13 percent according to the figures. Total deals in 2012 rose to A$13.5 billion from A$13.2 billion the previous year, driven by “relatively strong activity” early in the year, CBRE said.
Australian investors also became more active during the year, with transactions involving domestic groups climbing 11.5 percent to A$11.2 billion, compared with a 29.2 percent decline in deals with overseas participants, CBRE said. Activity by both domestic and foreign investors dropped during the fourth quarter, by 72.1 percent and 16.6 percent respectively, the broker said.
“Rather than transacting to grow portfolios, some domestic investors have been reassessing strategies and portfolio mixes, which is the rationale for some sales noted in the period,” CBRE said in the release. “The decline in sales activity in the quarter was partly driven by the fall in activity by foreign investors.”
Commercial property yields remain stable and wide relative to government bond yields, with the lack of confidence keeping the gap from shrinking substantially, McNabb said.