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Major bank forecasts ‘volatile year’ for real estate

Major bank forecasts ‘volatile year’ for real estate

In its latest Property Insights report, CBA noted that the residential property cycle will ease this year while commercial real estate fundamentals will continue to improve, with each market and sector at a different point of recovery.

The CBA report noted that recent years have seen an unprecedented rise in residential development, driven by high-rise and high-density apartments.

“The extraordinary growth across the industry reflects a surge in investor activity and a significant shift to apartment living in all of Australia’s major cities,” it said.

“However, apartment development is likely to slow this year ― following a trend that emerged in the middle of 2015, when approvals started to drop. A decline in approvals is typically a signal the commencement of new construction activity will ease within six to 12 months.”

With fewer approvals, commencements have tapered, CBA noted, although they’ve plateaued at a high level.

“This is likely to see buoyant construction activity continue into 2017,” according to the report.

“During the next phase of this unwinding process, as projects are completed, fewer will commence to take their place. The overall effect will be an eventual reduction in development activity which is likely to then continue at a more sustainable level.

Read the full article at Reb Online

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