Business owners are being urged to brace themselves for huge increases in the value of commercial real-estate sales this year as the housing market recovers from the impact of the global financial crisis.
Key points:Commercial real estate is valued at a record-breaking $US2.9 billionA number of major property deals are under way in the lead up to the global economic downturnThe latest property figures show sales in Sydney are expected to reach $US1.3 billion this yearThe figures were released as the Reserve Bank began to look at whether to raise interest rates by a quarter of a percentage point to shore up the economy and prevent a repeat of the Great Recession.
The Bank’s Monetary Policy Committee will consider the move in the next two weeks.
The latest figures from the Property Market Review showed a record number of commercial and residential real estate deals were announced this year.
“The real estate market is in a period of unprecedented volatility and this is likely to impact on the retail market and the commercial sector in particular,” Reserve Bank governor Glenn Stevens said.
“While the market is still recovering from the global downturn, there are signs that the economy is recovering and we may be entering a period in which the retail sector is expected to recover faster than the commercial and industrial sector.”
The Bank said the recent figures highlighted a “very strong” residential market.
“Commercial real-home sales in Australia have increased by a remarkable 46 per cent in the past 12 months,” Mr Stevens said in a statement.
“However, the residential sector continues to experience the most severe and adverse impacts of the financial crisis.”
The Reserve Bank has been keeping a close eye on the market, particularly after the housing bust hit.
The Reserve said in December it was forecasting an increase of 10 per cent to 12 per cent over the next three years, with the retail, industrial and residential sectors expected to grow at a similar rate.
Mr Stevens said the Reserve was likely to be “more cautious” about raising interest rates next year and that the Bank’s goal was to maintain inflation in the “near term”.
“The Bank will remain a conservative central bank, and our view remains that inflation should be kept at around 2 per cent,” he said.
Mr Stevenson said the bank expected the economic recovery to continue and that it would not change its stance on the value and rate of interest of commercial mortgages.
“As a result, our view is that the real estate industry will continue to enjoy an exceptional level of resilience and a recovery in commercial real property will continue,” he added.
“We will continue the strong momentum that we have seen in recent months with the construction and residential sector.”
Mr Stevens will be in Sydney on Tuesday for the first meeting of the Monetary Policy Council (MPC) and will also be meeting with the Governor of the Bank of Australia and Federal Treasurer Scott Morrison.
The MPC meeting is being held in Sydney and will decide whether to lift rates by one or two per cent.
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