Property market woes to deepen in 2009

Declining returns currently being experienced by investors in Australian property are likely to get even worse next year, with all sectors of the market expected to soften considerably.

Declining returns currently being experienced by investors in Australian property are likely to get even worse next year, with all sectors of the market expected to soften considerably.

According to independent property research firm Adviser Edge’s National Property Sector Update 2008, investors in office property will take the heaviest hit, with average capital value growth forecast to decline 14% and total return on investment falling 6.9%.

In the residential market, a gradual unwinding of record low vacancy rates and a 15% average decline in house prices across the nation will hit investors in the hip pocket.

And the retail property sector will also go backwards, with slowing consumer demand to help push investor returns into negative territory at -0.8% over 2009.

The safest place to park property cash in 2009 is likely to be industrial property where, although returns will decline, investors can still expect an average 3% total return next year.

The combination of the global credit crisis and the need to squeeze demand to fight inflation in the Australian economy underpin Adviser Edge’s bearish outlook for 2009.

But while the outlook for current property owners is gloomy, next year could be the perfect time for cashed up investors to snap up some bargains, head of research Louis Christopher says.

“Existing home owners and property investors need to assume their crash positions, while those who have been waiting on the sidelines should be enjoying a feast of delights in 2009,” he says.

Read more on the property outlook