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Australian real estate values at 16-year low

According to the Investment Property Databank, commercial real estate values in Australia have sunk to their lowest level since 1993, thanks partly to woeful returns from the retail sector. Total returns in 2008 were just 1.8%.

Commercial property values in Australia have fallen to their lowest levels since 1993, according to the latest research released by the Investment Property Databank.

The research, compiled by the Property Council and the IPD Australian Property Index to December 2008, showed that capital growth for commercial property in the country was -4.3 percent. Income return was 6.4 percent, resulting in a total return of 1.8 percent.

IPD said in a statement: “These numbers indicate a significant decline in the capital value of property investments held by the major institutional investors in the Australian market. It reflects the largest individual quarterly decline in value since 1993.”

Offices remained the strongest sector in Australia providing a total return of 2.7 percent. Industrial provided a total return of 2 percent. Retail performed the worst, providing a total return of just 0.7 percent. Capital growth in the sector was -5.4 percent for the quarter.

John Garimort, director at IPD said: “In my view, the market appears to be seeking to price the current change evident in: lower levels of investor demand brought about by a lack of capital; the significant increase in the amount of supply of assets available for purchase; and expectations regarding the ongoing covenant strength of the tenants within individual property investments.”