Invest
RBA warns on mounting property market risk
Investors are being cautioned on the increasing risk in one real estate market, as prices rise ahead of rents and vacancy rates continue to climb.
RBA warns on mounting property market risk
Investors are being cautioned on the increasing risk in one real estate market, as prices rise ahead of rents and vacancy rates continue to climb.
Addressing the Australian Shareholders Association (ASA) Investor Forum in Sydney last week, RBA assistant governor Malcolm Edey spoke about regulatory measures taken last year to mitigate risks in the housing market, highlighting the economic risks posed by commercial property.
“The second main area of risk focus domestically has been in commercial property,” Mr Edey said, adding that historically this sector has been a common source of financial instability both here and abroad.
“During the height of the GFC, Australian banks remained in comparatively good shape but they did suffer a noticeable deterioration in asset performance, with the aggregate non-performance rate rising to just under two per cent of loans,” he said.
“A significant part of that deterioration was in their commercial property lending. Impaired commercial property exposures accounted for around 30 per cent of Australian banks' non-performing domestic assets at that time.”
Mr Edey warned that the commercial property sector is again experiencing strong investor demand and bank lending to the sector is increasing.
“However, there are a number of emerging signs of increasing risk,” he said.
“Trends in commercial property prices and rents have been diverging over the past few years, with prices continuing to rise while rents have been flat to down. As a result, yields have declined. At the same time, vacancy rates have been increasing.”
As in the housing market, conditions in the commercial property sector have not been uniform across the country, and they have been noticeably firmer in Sydney and Melbourne than in other cities, Mr Edey noted.
“But the major commercial property markets have all seen downward pressure on yields over recent years,” he said.
“Strong demand from foreign buyers has contributed to this, reflecting the global environment of low interest rates and ‘search for yield’.”
Mr Edey said that while “the risks appear manageable at this stage”, they underscore the need for sound lending practices and for appropriate prudence by investors.
RELATED ARTICLES
Property
Australia’s rental squeeze is now a business problem: inflation, capacity and the new growth calculus
Record-low rental vacancies are no longer just a social headline – they’re reshaping cost structures, wage dynamics and capital allocation across corporate Australia. With economists warning of a ...Read more
Property
Rents Are Repricing Australia Inc: What record‑low vacancies mean for inflation, talent and strategy
Australia’s rental market has slipped into a vacancy desert, and it’s not just tenants feeling the heat. Persistently tight supply is pushing up rents, embedding services inflation and complicating ...Read more
Property
Young buyers poised for a comeback as 5% First Home Guarantee takes effect
In a move set to reshape the Australian property landscape, the government’s revamped First Home Guarantee is poised to open the doors of homeownership to a new generation of young AustraliansRead more
Property
AFG Securities waives settlement fees for first-home buyers, signalling strategic shift
In a strategic move aimed at easing the financial burden on first-home buyers, AFG Securities has announced the elimination of settlement fees on select loans, potentially saving customers up to $699Read more
Property
From trust woes to wealth: Australian agencies' secret to boosting prices
In Australia’s residential market, trust is no longer a nice-to-have—it’s a pricing variable. Persistent distrust of real estate agents is depressing vendor outcomes and inviting regulatory heat, but ...Read more
Property
Reality check for first home buyers: Affordable suburbs with 5% deposit
In a significant development for Australian first home buyers, a new property search tool from Aussie Home Loans is set to transform the way prospective homeowners approach the market. As the Federal ...Read more
Property
Trust as a performance multiplier in Australia's real estate market
In Australia’s A$10–11 trillion housing market, trust is emerging as a crucial factor that sellers and agencies can no longer afford to overlook. Traditionally viewed as a soft metric, trust is now ...Read more
Property
LJ Hooker Lake Macquarie makes a splash with Belmont buy as real estate consolidation looms
LJ Hooker Lake Macquarie’s acquisition of the Belmont office, including its rent roll, is less about shopfronts and more about balance‑sheet resilience. In a market where listings ebb and flow with ...Read more
Property
Australia’s rental squeeze is now a business problem: inflation, capacity and the new growth calculus
Record-low rental vacancies are no longer just a social headline – they’re reshaping cost structures, wage dynamics and capital allocation across corporate Australia. With economists warning of a ...Read more
Property
Rents Are Repricing Australia Inc: What record‑low vacancies mean for inflation, talent and strategy
Australia’s rental market has slipped into a vacancy desert, and it’s not just tenants feeling the heat. Persistently tight supply is pushing up rents, embedding services inflation and complicating ...Read more
Property
Young buyers poised for a comeback as 5% First Home Guarantee takes effect
In a move set to reshape the Australian property landscape, the government’s revamped First Home Guarantee is poised to open the doors of homeownership to a new generation of young AustraliansRead more
Property
AFG Securities waives settlement fees for first-home buyers, signalling strategic shift
In a strategic move aimed at easing the financial burden on first-home buyers, AFG Securities has announced the elimination of settlement fees on select loans, potentially saving customers up to $699Read more
Property
From trust woes to wealth: Australian agencies' secret to boosting prices
In Australia’s residential market, trust is no longer a nice-to-have—it’s a pricing variable. Persistent distrust of real estate agents is depressing vendor outcomes and inviting regulatory heat, but ...Read more
Property
Reality check for first home buyers: Affordable suburbs with 5% deposit
In a significant development for Australian first home buyers, a new property search tool from Aussie Home Loans is set to transform the way prospective homeowners approach the market. As the Federal ...Read more
Property
Trust as a performance multiplier in Australia's real estate market
In Australia’s A$10–11 trillion housing market, trust is emerging as a crucial factor that sellers and agencies can no longer afford to overlook. Traditionally viewed as a soft metric, trust is now ...Read more
Property
LJ Hooker Lake Macquarie makes a splash with Belmont buy as real estate consolidation looms
LJ Hooker Lake Macquarie’s acquisition of the Belmont office, including its rent roll, is less about shopfronts and more about balance‑sheet resilience. In a market where listings ebb and flow with ...Read more
