[Video: Question and answer session with Craig Tyson, ANZ’s Head of Australasian Property Securities, New Zealand.]
Question: Why has property struggled over the past 12 months?
Craig Tyson: Yes, it’s been a tough period for property. We came out of COVID with an inflation problem and what we saw was central banks around the world raising rates to get in to tackle that inflation problem. In fact, our Reserve Bank was one of the first to start raising rates. And, our rates have risen by over 5%. So what that did is put a real pressure on both the housing market and the commercial property market. In the commercial market we saw interest ratings rising at a faster rate than rents. And so that had an impact to the performance of the commercial market. And in the housing market we saw mortgage rates rise from the lows of sort of around 2% to today, where they are closer to 7%. And that’s had a big impact on the demand, certainly from first home buyers but pretty much all aspects of the housing market. And so property really has been on its heels the last 12 months.
Question: How has the Work from Home phenomenon affected property?
Craig Tyson: Yes, well clearly it’s had a huge impact on office property.
Working from home has obviously had an impact on the utilisation of office and we’ve seen utilisation rates fall to below 50% so only you know, 50% full. Office landlords have obviously been impacted. And there’s two schools of thought about working from home. There’s people who think office has been affected for the long term and will never recover. And then there’s the school of thought which we kind of believe in which is that people will return to the office on average probably about four days a week.
Most corporates that we speak to are desperate to get their employees back into the office. Why? Because people work better face to face. There’s that dynamism, that energy and that spontaneity that you just don’t have when you’re in a Zoom meeting or a Teams meeting.
Question: There are signs residential property prices are near the bottom. What does this mean for the property sector?
Craig Tyson: It certainly feels like we’ve turned the corner. The Reserve Bank indicated at their last meeting that when they took interest rates to 5.5% that they’d probably done enough to get inflation under control. And, we certainly think that there’s a good chance we’ll see interest rate cuts next year. Some economic forecasters are saying, perhaps later this year we’ll see some rate cuts. So we are hopeful that once you see those rate cuts come through, we’ll see mortgage rates start to fall and that confidence will get come back into the market. We’ll see that firstly through the days to sell coming down, which is elevated at the moment. And then secondly, we’ll start to see the turn over improve. Those are the real signs that we’re looking for to see that confidence back in the market.
Question: After a challenging period, what is the outlook for property?
Craig Tyson: Well, it really depends on the economy and we have an election later this year. There’s a lot of other uncertainty out there in the global economy and all of those things impact the property sector in general. We’re confident that the worst is behind us. As I’ve talked about there’s going to be some interest rates cuts, hopefully next year, that will certainly help. But it’s going to be a long, slow process, I think, of healing, over the next sort of, one to two years.
Published 22 June 2023. Information can change, is general, and not advice.
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