Commercial property buyers made $11.8 billion of purchases in the first nine months of 2023, according to JLL, well short of the activity recorded in 2022, when $29.2 billion of transactions occurred throughout the entire year.

Activity has fluctuated during 2023, with $4.3 billion of transactions in the first quarter, $3.5 billion in the second and $4.0 billion in the third.

By way of comparison, there were $9.6 billion of transactions in the third quarter of last year, representing a year-on-year decline of 58%.

Drilling down on the Q3 data, logistics & industrial volumes fell 38% year-on-year to $1.6 billion, office fell 77% to $1.2 billion and retail fell 29% to $1.2 billion.

JLL’s Australasian Head of Capital Markets, Luke Billiau, said buyers weren’t seeing much value in the Australian commercial market right now.

“The fall in transactions since the beginning of 2023 is indicative of the pricing discovery in the market as a result of rapidly changing funding costs and a low-leverage environment relative to other global markets that prolongs this period,” he said.

That said, he felt Australia was well-placed to attract global capital, due to its growing population, economic resilience and increasing infrastructure investment.

Australia is well-capitalised relative to other countries

In the first nine months of 2023, foreign buyers accounted for 19.0% of commercial property transactions, down from 25.5% in the same period last year.

JLL’s Head of Capital Markets Research, Andrew Quillfeldt, said overseas interest would be one factor that would drive investment activity in 2024.

“While the institutional real estate market in Australia is well-capitalised relative to other countries, we’re still expecting some capital recycling for sector reallocation purposes to drive asset sales,” he said.

“Industrial and build-to-rent are becoming even higher conviction strategies for many groups. Furthermore, some funds are likely to be looking to divest assets to fund development and to de-lever to maintain conservative gearing.”

With buyer activity subdued, there might be an opportunity to buy a quality commercial asset for a low price. If you’d like to take action, contact me and I’ll arrange the finance for you.

The federal government’s Home Guarantee Scheme (HGS) is helping an increasing number of Australians break into the market, research from Housing Australia has found.

According to the Federal Government, more than 32,500 guarantees were issued in the 2022–23 financial year, an increase of around 39% on 2021-22, when 23,300 guarantees were issued. That included:

The HGS includes three separate programs. The First Home Guarantee and Regional First Home Buyer Guarantee help first-time buyers purchase a property with just a 5% deposit, while the Family Home Guarantee helps single parents enter the market with a 2% deposit. Crucially, participants don’t have to pay lender’s mortgage insurance, because the government guarantees the difference between their deposit and a standard 20% deposit.

One standout feature of the HGS is how many young people are using government assistance to buy their first home. In 2022-23, 51% of First Home Buyer Grant participants were aged 18-29 years, while 60% of Regional First Home Buyer Grant participants were in that age bracket.

Another is the ultra-low arrears rate – for the two first home buyer programs, arrears were under 0.1% last financial year.

It’s also noteworthy that since the HGS started in 2019-20, a total of 9,730 participants – or 12% of the total – have transitioned out of the scheme by increasing their equity to at least 20%. 

 

How to qualify for the HGS

Not all first home buyers and single parents are eligible for the HGS. Criteria apply.

That includes income caps: buyers can earn a maximum of $125,000 for singles and $200,000 for joint applicants.

It also includes property price caps, which differ from location to location, ranging from $400,000 for homes on Christmas Island and Cocos Islands to $900,000 for homes in Sydney, Newcastle, Lake Macquarie and Illawarra.

Also, not all lenders participate. There are 33 lenders that are able to offer HGS loans, including three of the big four banks and a range of smaller lenders.

Get in touch if you’re a first home buyer or single parent and you’re wondering if you’re eligible for the HGS. I’ll let you know if you qualify and work with you through the next steps to get you on the property ladder.

When you buy your next vehicle, there are three different ways you can get a loan.

The first is through your car dealer. This can be convenient, because the dealer can sell you a car and arrange a loan at the same time. But there are a few things to consider when it comes tobig problems with dealer finance. First, dealers generally work with just one lender, so they won’t compare the market for you. Second, dealers are experts in cars, not loans, so it would be risky to rely on their advice. Third, dealers are incentivised to sell you a car, not find a loan that matches your long-term financial goals.

The second way to get a car loan is to go directly to your bank. On the plus side, bank staff know more about loans than car salespeople. But there’s a massive downside, which is that banks will only tell you about their own products, even if they know other lenders are offering better loans with lower rates.

The third way is to get a loan through a finance broker. Many consumers regard this option as the best, because your broker will:

 

Finance first, vehicle second

Before you start looking for a car, motorbike or any other vehicle, get in touch with me to discuss your loan. 

I’ll calculate your borrowing capacity and present you with a range of options, so you’ll know, ahead of time, how much you can borrow and how much your loan will cost.

I look forward to helping you.

There’s been a big increase in the number of properties being listed for sale, which should please anyone in the market for a home or investment property.

Throughout Australia, the number of new listings (defined as those less than 30 days old) was 14.3% higher in September than August, according to SQM Research. That included increases of:

Some sort of increase was to be expected, given that listings generally rise as winter ends and spring begins. So it’s noteworthy the increase in new listings not only occurred month-on-month but also year-on-year – by 5.7% nationally, and in every capital city except Perth.

Meanwhile, the number of total listings – which includes both new listings and older listings – throughout the country also rose, by 9.3% month-on-month and 1.4% year-on-year.

 

Asking prices reach record levels

Generally, an increase in listings puts downward pressure on prices, as more supply should mean less demand.

But in September, national asking prices – which refer to the prices initially being asked by vendors, rather than final selling prices – rose 0.9% and reached a new record high. Asking prices also hit record levels in Sydney, Brisbane, Perth and Adelaide.

In other words, buyer competition is strong in many parts of the country.

That makes it even more important to get a pre-approval before you start your property search, because vendors tend to favour buyers who are ready to do business. If you want to buy a property in late 2023 or early 2024, my strong recommendation is to contact me now so I can compare home loans for you and get your finance in place.

The Payment Times Reporting Scheme, which aims to improve payment times for small businesses, needs to be updated to better serve the small business sector, according to an independent review of the Payment Times Reporting Act 2020.

Craig Emerson, who conducted the review, said the federal government should ban unfair payment practices, increase the powers of the Payment Times Reporting Regulator and increase the importance of prompt payment in the Commonwealth procurement supply chain.

Dr Emerson also recommended that the government “foster a culture of prompt payment” among businesses by taking advantage of their desire to protect their reputation. “Paying small-business suppliers quickly should be part of the environmental, social and governance (ESG) obligations of large businesses,” he said, adding that there should be public reporting on “worst and best payers to small businesses”.

Small businesses should be helped to recognise and act against unfair payment-related contract terms, according to Dr Emerson. “Introduce examples of unfair terms relating to payment of small-business suppliers into updated regulatory guidance on unfair contract terms,” he said.

Dr Emerson also said that maximum payment times from big to small businesses should not

be mandated, “given the perverse outcomes” that could result.

Minister for Small Business Julie Collins said the government would consider the review’s findings and recommendations.

 

Ombudsman supports report

The small business ombudsman, Bruce Billson, supported Dr Emerson’s report.

“Finance is the oxygen of enterprise. Cash flow is vital to the survival of small and family businesses, yet this sobering review by Dr Craig Emerson finds there has been no significant improvement by big business to pay their small business customers in a timely way. The original intention of the Payment Times Register was to improve the performance of big business but it has so far failed. Dr Emerson has produced a thoughtful road map to get this ambition back on track,” he said.

“Almost 40% of the requests for assistance to our office relate to payment times and payment disputes and, as Dr Emerson has noted, late payments are a major source of financial and emotional stress for small-business owners and have flow-on consequences throughout the economy. Sadly, Dr Emerson’s key finding aligns with what we have been saying, that the performance of many big businesses in paying small businesses has been woeful.”

Mr Billson also endorsed Dr Emerson’s plan to publicise the worst and best payers.

“A similar system operates in the UK and has been highly effective and has made paying small-business suppliers quickly part of positive corporate reputations and the environmental, social and governance obligations of large businesses,” he said.

As Mr Billson said, finance is the oxygen of enterprise. Contact me if you want to know aboutdifferent cash flow lending solutions to make breathing a little bit easier.

The tourism sub-sector of the commercial property market has been an outlier over the past three years – for worse during the pandemic and now for the better.

“For the rest of the commercial property market, volumes hit new highs as interest rates fell in 2020 through to 2022, with a range of new investors looking to diversify their portfolios,” according to Ray White Commercial Head of Research Vanessa Rader. 

“However, lockdowns, border closures and a halt to international travel saw interest in tourism assets fall to long-term lows, with annual turnover of $1.4 billion in 2020 and limited sales during the subsequent quarters.”

Since then, investment has fallen in the wider commercial market, in part due to rising interest rates, but skyrocketed in the tourism sub-sector.

“Turnover saw a swift increase during 2022 in response to improving tourism data, showing increased air travel, hotel occupancy and growth in average daily room rates. Interest in smaller regional hotels and motels also increased as domestic travel rebounded due to a strong driving market which improved further after restrictions eased regarding interstate movements,” Ms Rader said.

“With both domestic and international travel showing these improvements, investment levels in hotel assets across the country has now increased. During 2022-23, volumes reached $4.1 billion, a growth of 56.7% on the prior year, highlighting the improved confidence across the tourism industry.”

At the same time as tourism transaction volumes have increased, there’s been a change in the type of buyer purchasing tourism assets, according to Ms Rader.

“Historically, offshore buyers have been the major purchasers of hotel assets, however, we have seen a reduction this year in activity from this buyer group. Private and institutional buyers are representing the greatest net acquisition in 2023 with foreign investors representing the largest seller group,” she said.

Why hotels are likely to remain in demand

Ms Rader said tourism had experienced a wild ride over the past decade, but that the future looked bright.

“The five-year average returns of just 3.0% highlights the difficulty for this sector during the pandemic era, while assets such as office recorded 6.6% returns. However, over the longer 10-year period, we can see despite these difficulties that returns continued to achieve outstanding levels at 9.2% per annum, closely aligned to office at 9.4% and well ahead of the retail sector which only represented a 5.7% annual return,” she said.

“Looking ahead, the outlook for the hotel sector is strong. While inflationary pressures have been elevated, reducing discretionary spending levels, we continue to see demand for travel high domestically. The current state of the Australian dollar will further enhance the attractiveness of Australia as a destination, improving the demand for accommodation, growing occupancy and returns for this commercial investment class.”

There are a range of tourism assets available to investors, from B&Bs and campgrounds to hotels and convention centres. If you’d like to add a tourism asset to your portfolio, contact me and I’ll arrange the finance for you.

Outgoing Reserve Bank Governor Philip Lowe has used a farewell address to deliver some insightful remarks about inflation, unemployment and productivity.

Before Dr Lowe became governor, inflation was quite stable. But during his seven-year stint in the top job, inflation ranged from a low of -0.3% to a high of 7.8%. 

“My view is that it will be difficult to return to the earlier world in which inflation tracked in a very narrow range,” he said.

“The increased prevalence of supply shocks, deglobalisation, climate change, the energy transition and shifts in demographics mean either steeper supply curves or more variable supply curves. While this doesn’t mean that the inflation target can’t be achieved on average, it does mean that inflation is likely to be more variable around that target.”

Unemployment

During Dr Lowe’s governorship, unemployment fell from a range of 5.5-6.0% to about 3.5% – the lowest rate in nearly 50 years.

“The share of Australians with a job has never been higher than it is today and the number of people with a job has increased by more than 2 million since mid-2016,” he said.

“The current cycle still has a way to run, but it is possible that Australia can sustain unemployment rates below what we have had over the past 40 years. If so, this would be very good news for both the economy and our society.”

Productivity

Dr Lowe said it was vital for Australia to increase its productivity growth, because that was “central to our future prosperity”. Unfortunately, though, our recent record on productivity had been poor.

“There have been many investigations into the underlying causes and what to do about this. So, there is no shortage of ideas, including in the areas of tax, human capital accumulation, energy and infrastructure, the design of our cities, the approach to regulation and competition policy, industrial relations and the provision of government services,” he said.

“There are improvement opportunities in all these areas. The problem is not a lack of ideas. Instead, it is in building the consensus within society to implement some of these ideas. This is, fundamentally, a political problem, and it is a major problem. If we can’t build a consensus for changes, the economy will drift and there is a material risk that our living standards will stagnate.”

The Reserve Bank of Australia’s new Chair Michelle Bullock today announced the central bank would hold the nation’s cash rate at 4.10%.

Despite the cash rate sitting four percentage points higher than its all-time low in 2022, we are still seeing the typical springtime boost in properties going to auction. The week ending 24 September saw an estimated 2,725 properties go under the hammer, up from 2,314 the week prior and 2,275 from the week before, according to CoreLogic. This is more than double the auctions seen this time last year.

And so it looks like flowers are in bloom, birds are chirping (and swooping) and auctioneers have truly warmed up their gavels. That’s right, we’re in spring selling season. Are you prepared?

Whether you are just beginning your property-purchase journey, or adding to your portfolio, it is a good idea to come have a chat to understand your borrowing capacity and whether pre-approval could help you have more confidence when bidding.

Some quick tips to help you on your bidding journey.

    1. Keep an eye on the market. See what other, similar properties in the area are selling for.
    2. Reach out for a property report. I can provide this free of charge, showing the approximate value of the property you are interested in.
    3. Attend open homes. Even if you don’t think you want to bid for that property, it can help to understand demand in the area.
    4. Create a shortlist. By having a few homes on the radar you could be less likely to develop an emotional tie to one, which can lead to bidding higher than you were comfortable with.
    5. Have a support team. It’s a good idea to have a conveyancer/solicitor ready to go and aware of your intention to buy. You may also consider getting a building inspector to have a look before the auction and of course, your mortgage broker.

If you are heading to auction, some important things to keep in mind include:

Over the past three years, there’s been a significant increase in the number of new businesses, which may translate into increased demand for commercial property.

Between the 2019-20 and 2022-23 financial years, the number of actively trading businesses in Australia rose 11.9%, from 2,314,448 to 2,589,873, according to the Australian Bureau of Statistics.

Focusing just on the most recent year, the industries that experienced the largest increase in business numbers were:

Ray White Commercial Head of Research Vanessa Rader said the strong growth in the healthcare & social assistance industry matched “the strong demand for healthcare assets, be it hospitals, medical centres and suites, and integrated facilities”.

Ms Rader also said the growth in transport, postal & warehousing was being driven by a rise in fuelling activity. “While low vacancies remain across most industrial markets, the requirement for distribution and storage facilities is not expected to wane, however a reduction in manufacturing businesses may assist in opening up some industrial assets,” she said.

Meanwhile, despite the poor performance of many office markets across the country, “new business starts in the professional sectors, including finance, insurance and real estate, may see the office market turn a corner”.

 

What is the outlook for different asset classes?

Data from Morgan Stanley Capital International (MSCI) showed that demand remained for investors in the healthcare and industrial sectors looking to take advantage of the long-term capital gains associated with these asset classes, according to Ms Rader.

“Strong and stable income returns are also a feature of these asset classes, while the mismatch between demand and supply to occupy has ensured income certainty. Over the

last 10 years we have seen annual total returns for industrial and healthcare at 14.2% and 13.8% respectively, ahead of both retail and office assets,” she said.

For the office sector, Ms Rader said the high vacancy environment would take some time to play through, keeping returns subdued and investor demand levels dampened until substantial price corrections were achieved. While there had been an encouraging number of new business starts among professional services industries, “the shift in workplace behaviours around working from home the greater stumbling block for this asset class,” she said.

 

“Retail assets are also grappling with the changing consumer sentiment towards bricks-and-mortar retail,” according to Ms Rader, and “while income returns remain stable, this uncertainty has seen limited positivity in capital returns over the last 10 years”.

 

Commercial real estate can provide diversity to an investment portfolio. Another benefit of commercial property is that it features a range of asset classes, catering to investors’ different goals and risk profiles. Get in touch if you’re thinking about investing in commercial property. I’ll explain how to finance the deal and compare different loan options for you.

 

Albanese govt reforms first-home buyer program

The federal government has made it easier for first-home buyers to access the First Home Super Saver Scheme.

Previously, if first-home buyers wanted to use the scheme, they had just 14 days to request a release of savings after entering into a contract. That has now been extended to 90 days.

“The changes will also apply to eligible individuals who applied from 1 July 2018, which will help Australians who engaged in the scheme in good faith, finally access the money they saved to purchase their first home,” Minister for Financial Services Stephen Jones said.

 

How the First Home Super Saver Scheme (FHSS) works 

The FHSS lets first-home buyers save for their deposit by making voluntary contributions (both before-tax concessional and after-tax non-concessional) into their superannuation account.

Subject to conditions, first-home buyers can reclaim these contributions – plus associated earnings – when they want to buy their first home, which can be any new or existing home within Australia.

First-home buyers can apply to have a maximum of $15,000 of their voluntary contributions from any one financial year included in their eligible contributions to be released under the FHSS, up to a total of $50,000 contributions across all years. (Please note, the limit was $30,000 up to 30 June 2022.)

First-home buyers will also collect the associated earnings, which are not the actual earnings that get accumulated but a deemed amount of earnings calculated based on a specific formula.

 

Help for first-home buyers

The federal government and state governments also offer other housing assistance schemes for eligible first-home buyers.

Reach out if you’d like to know what schemes you (or your children) may be eligible for.

I can also compare home loans for you and manage your loan application.