The credit crunch has pushed down property prices, reduced the number of prospective buyers and created plenty of opportunities for astute property investors.
That’s the message from Scott Keck, veteran property expert and managing director of property group Charter Keck Cramer, who addressed the AICC Property Forum in Melbourne yesterday.
Keck says that while the credit crunch has hurt property owners carrying high debt levels very hard, patient investors who have the ability to service smaller amounts of debt now have a distinct advantage.
Keck nominates inner urban residential properties as his stand out opportunity. “Population growth and demographic change are going to exert extreme demand pressure on apartments and townhouses, and if appropriate for higher density [redevelopment], relatively small sites from 1500 square metres up to much larger sites can be relied upon to provide handsome returns. I expect that typically growth for candidate sites could be 50% to 75% over the next two years.”
On the commercial property front, Keck nominates large-plate offices in suburban locations as another growth area. The key to these developments is finding a large site, even it means looking on the fringe of prime property areas. “By choosing the right site size – which allows the appropriate building to be delivered – you can attract a quality tenant which ultimately will result in a first class investment, notwithstanding that it may not be of prime location,” Keck says.
He expects interest rates will be on the way down in around 15 months, which should help property yields improve from current levels of 7% to 7.5% to 6.25% to 6.5%. “I think the strongest rebound will be in the office and industrial sector, but I believe that retail will take longer [because] of a downturn in consumerism, which is squeezing margins and weakening the prospects for real rental growth.”
His big tip for buyers? Take full advantage of distressed sellers. “If you offer very short cash, absolutely unconditional termsm and make the sellers’ problem go awaym you are likely to get a very big discount.”
Keck also says property investors need to keep in mind the underlying strength of Australian property. “The current economic problems may take a while to sort themselves out but fundamentally Australia…has a tremendous future due to population growth and all the other good things that we know to be at the foundation of our lifestyle in this country.”
Read more about the general property outlook