TIGHTER RESIDENTIAL REAPS A COMMERCIAL REWARD

Maroochydore_hubChanges to residential investment lending criteria is starting to result in a changing landscape for Australia’s commercial property sector, including the market on the Sunshine Coast.

The Australian Prudential Regulatory Authority (APRA) has initiated tighter lending requirements for banks and financial institutions due to rising concerns about the number of property investors, the stability of the market and economic conditions.

Part of the focus is to insist borrowers have a larger deposit, reducing a borrower’s risk should the property market suddenly decline.

Luxe Commercial managing director Chris Sales says the changes had impacted positively on the commercial sector as investors sought to “actively diversify” their portfolios by spreading their risk.

“Historically low interest rates and rising house prices, along with the tighter residential investor lending conditions, has seen a lift in enquiry for commercial property,” he says.
“Commercial property is a sound alternative for those who appreciate a bricks and mortar investment, whether they’re looking for retail, industrial or even commercial premises, the returns are also increasingly favourable.”

APRA’s directives to banks and lenders do not apply to commercial real estate investment.

The Sunshine Coast’s lower cost base and lifestyle made commercial property investments attractive propositions for many investors, including those from interstate who were looking at key sites in easily accessible and highly visible locations.

The increased interest has gathered momentum since February, improving further, Sales says, as higher quality investment sites became available.

Investment in Australian commercial property set a new record in the 2014-15 financial year according to a report from Colliers International. An overall investment in retail, industrial and office sectors increasing by 19 per cent to $28.88 billion in total sales.

Sales says the forecast is for the trend to continue again in the 2015-16 financial year, barring any major global economic events, with Australian and international investors attracted to the sector’s consistent returns and potential for positive short- to medium-term capital gains.

Read more property editorial from Luxe Commercial managing director Chris Sales in My Weekly Preview.

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