Investor confidence in the outlook for Australia’s property market on the medium term has dropped for the first time since 1999, according to a new report by international real estate money management and services firm Jones Lang LaSalle.
The survey of retail property investors across Australia found that 35% expect a deterioration of the property market over the next three to five years, compared to just 20% who expect an improvement and 45% anticipating no change.
In the short term, however, investor sentiment remains buoyant, with 85% of respondents saying they plan keep investing, 16% planning to hold their current position and only 4% indicating they are keen to sell.
The results suggests a “moderation in sentiment” rather than outright negativity, according to Jones Lang LaSalle’s national head of investments, John Talbot.
“Investors are overwhelmingly still intending to remain net purchasers of commercial real estate over the next 12 months. The majority of respondents are still expecting improved or the same conditions to prevail over the next three years, while some others believe that sentiment has deteriorated, although the market conditions remain strong,” Talbot says.
Pessimism about the retail and industrial property markets in the medium term is the main reason for the decline in investor sentiment.
Almost 50% of respondents to the survey said they feel that there will be a deterioration of total returns over the next three years in the industrial property sector, while overall negative sentiment about the retail property market increased to 36%.
This is offset somewhat by a more positive outlook for the office property market, where on balance 19% of investors believe values will rise.
Across the states, the greatest improvement in investor sentiment is in Canberra, up 22%, and Sydney, up 15% since last year’s survey. Sydney was viewed as showing the strongest prospects for growth in the short term, with Adelaide evenly balanced and Perth and Brisbane losing appeal over the medium-term.
Unsurprisingly, given the souring local outlook, 79% of investors said they intend to increase their exposure to direct overseas property and 62% to indirect overseas property.
“Nobody is looking to reduce their exposure to overseas property, either direct or indirect,” Talbot says.