Welcome to this week’s Property News.
The naming of ESR & GIC as the purchaser of the Blackstone portfolio comes as no surprise, however the sharp 4.5% yield paid by the group is a surprise and establishes a new benchmark for valuations across the industry. More details about the transaction will be revealed in the coming days and we will seek to unpack this further next week.
This week also saw the release of several important pieces of data which reveal what we are thinking about in terms of the strength of the economy.
The first was the NAB Business Conditions survey which rose to a record high in March, driven by strong increases in conditions across all states and industries. This also included Forward orders – which also rose to record levels – pointing to ongoing strength in activity with the pipeline of work rising further. While business confidence was slightly lower in the month, it remains at a high level, suggesting that firms themselves are optimistic that the strength in activity will continue.
The second indicator was the Westpac Consumer Confidence survey which also rose to 11 year highs. The survey was conducted in the week following the unwinding of the JobKeeper program and in the midst of disappointing progress on the vaccine roll-out locally. Initial fears that this would slow recovery and extend job losses and undermine confidence have proven to be unfounded.
Clearly, confidence would have been buoyed by positive news around the labour market with much higher levels of job vacancies and employment gains that most people have expected. Much of this is led by gains amongst those working in construction suggesting the surge in housing construction activity is providing a significant uplift.
The strong housing market more generally is also likely to be boosting confidence. Auction clearance rates are near 80% and dwelling prices have lifted by 5.8% nationally since the beginning of the year. If your neighbourhood is like mine, the neighbours are all talking about “did you hear how much that house sold for”, clearly a sign of a hot housing market.
The Reserve Bank Board next meets on May 4 – one week before the Federal Budget. Following the latest Board meeting, the RBA Governor said that he expects to hold the cash rate steady at the record low of 0.1% until at least 2024. We will be watching to see if this position changes.
I would also encourage you to take a look at Investa’s Report on the Office Market. Investa analysis concludes that the net impact of increased working from home and greater use of office space for team-based work is expected to create a moderate softening in future office demand when compared to pre-COVID forecast assumptions and that as a consequence they see an easing in office rental affordability (ie lower rents), higher market vacancy and a strong tenant preference for centrally located, high quality and flexible office space will support a ‘flight to quality’ trend.
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