Following the recent terrorist attack in US and security measures adopted by European and US expatriates, demand for apartment accommodation is likely to decrease. The occupancy rates of purposed-built office buildings in the Golden Triangle and the whole of CBD dipped marginally while rentals saw a greater reduction of 7% to 9% from the previous quarter.
Despite softening economic conditions, the rental market for residential properties, especially serviced apartments and apartments, is expected to remain strong as the introduction of the mass rapid transit and the Skytrain (BTS) will improve accessibility of several areas. The suspension of the residential land sales by the government will mitigate the oversupply situation in the residential market. Rentals of prime retail space declined by 5% due to the worsening economic climate while capital values remain stable.
The weakening manufacturing sector will result in a drop in demand for industrial space. The Australian economy has recovered strongly since early 2001 but the worsening global economic and political climate is expected to curtail any further improvement Online Property Valuation GDP growth of 0.9% was recorded in the June quarter, which on an annualised basis indicates that the economy has returned to a 3.5% – 4% underlying growth rate. The rebound has been driven by a recovery in the residential construction sector, stronger retail spending
The likelihood of a global economic slowdown and uncertainty generated by the “War on Terror” is expected to curtail any further strong recovery in the Australian economy in the short term. Despite the strength in the sales market, the rental market is starting to become very patchy and some cities are now experiencing an oversupply of accommodation. The rental market in Sydney is deteriorating rapidly with the city’s vacancy rate increasing to 4.6%, its highest level since 1985. With interest rates forecast to remain low in the short term, the outlook for the sales market remains strong.