Rate cut could spur buying, if it gets passed on: analysts
Interest rate-sensitive real estate investment trusts, such as retail landlords Westfield and GPT Group, will be major beneficiaries of Tuesday's cut.
Research director for Colliers International Mark Courtney said the rate had the potential to benefit the property market but only if the banks passed it on.
"It would be great news for the property industry. Another 25 basis points off the mortgage variable rate and that becomes interesting," he said.
GPT Group chief executive Michael Cameron said: "This is a welcome decision and will give an important boost to consumer confidence.
"The rate cut will help to offset what is shaping to be a tough federal budget for households," he said.
Stockland, Mirvac, Lend Lease and Australand are the biggest listed residential developers in the country and have been calling for lower rates to stimulate the flagging construction sector.
In the latest data, the national construction sector hit a seven-month low in April as conditions continued to deteriorate.
The latest Australian Industry Group/Housing Industry Association Australian Performance of Construction Index was down 3.8 points at 35.2 in the month. (Readings below 50 indicate a contraction in the industry, with the distance from 50 indicative of the strength of the decline.)
But the positive for developers is that Jones Lang LaSalle's latest report shows Sydney has the oldest office stock profile in Australia, with almost half the CBD office stock older than 30 years.
The 284,000 square metre commercial development at Barangaroo has the capacity to meet only 50 per cent of the projected demand over the next 10 years.
Frequently Asked Questions about this Article…
The official interest rate was cut by 25 basis points to 2.75%. Property specialists say this could boost investment in commercial real estate — but the benefit depends on banks passing the full cut on to borrowers.
Interest rate‑sensitive real estate investment trusts, particularly retail landlords such as Westfield and GPT Group, are expected to be major beneficiaries if the rate cut is reflected in lower borrowing costs.
Analysts including Colliers International research director Mark Courtney say the rate cut only helps the property market if banks pass the full reduction to customers. A 25 basis point drop in mortgage variable rates would make financing more attractive and could spur buying.
GPT Group chief executive Michael Cameron called the decision welcome, saying it will give an important boost to consumer confidence and help offset what looks set to be a tough federal budget for households.
Those big listed residential developers have been calling for lower rates to stimulate a flagging construction sector. A reduction in borrowing costs could help revive demand for new housing and development activity.
The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index fell 3.8 points to 35.2 in April, a seven‑month low. Readings below 50 indicate contraction, so the data highlights ongoing weakness in construction that could influence property and developer earnings.
Jones Lang LaSalle reports Sydney has the oldest office stock profile in Australia, with almost half the CBD office stock older than 30 years. Older stock can create opportunities for redevelopment, refurbishment or new commercial projects for developers and investors.
The Barangaroo commercial development is 284,000 square metres, but it has the capacity to meet only about 50% of projected demand over the next 10 years, underscoring potential further demand for new commercial space.
Call 1300 880 160
Start a chat
Schedule a call
