Rate pause welcomed by property investors as sales slump

The pause in rising the official cash rate will help bring some clarity to the commercial property market, which has seen an almost 70 per cent slump in deals in the past year.

The Reserve Bank of Australia decided against rising the cash rate, which property agents said would instil more confidence in the medium term.

Knight Frank’s chief economist, Ben Burston, said the extended period of month-on-month rate rises has generated significant uncertainty as to how high rates will ultimately go, “but the pause will be taken as an indication that the peak of the hiking cycle is now within reach and may indeed turn out to be 3.6 per cent”.

“For property investors, this means that the macro context now looks more reassuring as we look ahead, with the likelihood that rates will remain stable over the next few months as the RBA assesses the impact of the rate increases to date, and potentially be cut in 2024-25 if the economy slows as expected,” Burston said.

Pressing the pause button comes as a time when preliminary sales volumes for the first quarter of 2023 have hit $4.74 billion down 68.2 per cent on the same time last year when sales approached $15 billion.

Ray White’s head of research, Vanessa Rader, said NSW remained the key market for transactional volumes, helped along by a number of high-value asset transactions, notably in the retail and hotel sectors.

“This year 42.8 per cent of sales were across NSW, similar to the 44 per cent recorded in the same time period of 2022. Victoria is the second most popular market to invest in, growing its appeal to represent 28.1 per cent, up from 22.2 per cent last year.”

Rader’s data revealed that office had halved its proportion of all investment this year and there were limited larger trophy sales compared to the same time last year, resulting in this asset class accounting for just 15.42 per cent.

One of the larger deals being worked on is by Mitsubishi Estates Asia, which is said to be looking at taking a 25 per cent share in Lendlease’s $1.2 billion Victoria Cross over-station ­development in North Sydney. The asset is anchored by a 42-storey office tower with retail and public spaces at the train station ground level.