How will politics impact on Australian commercial property markets?

Experts predict that population growth will have the greatest impact on Australian commercial property markets heading into the new financial year.

But will politics also play a significant role?

In the latest article in our series exploring the social, political and financial trends and themes that will shape the commercial market over the next 12 months, we delve into the political sphere.

A LIMITED IMPACT

The new global era of uncertainty under US President Donald Trump and even internal rumblings within Australia’s Coalition Government are unlikely to impact investor sentiment, according to experts.

A downturn in the economy or even a significant dive in population growth will be the only things that could take the heat out of commercial property market — and there’s no sign of it happening any time soon. 

Analysts say Australia’s domestic markets are in good shape and no amount of politicking will change that as investors battle to find good assets.

Social commentator Mark McCrindle says the next financial year will be more likely influenced by economics - driven in some areas by policy - but not the politics around it. 
“It’s not what people say but rather if there is a policy change or back down — that is when investors get a bit concerned,” McCrindle says. 

“If we look at things like political discourse locally I don’t see anywhere where it affects business decisions.”

“We are in a bit of an embedded soft economic period, and I think people are making their investment decisions around that.”

“Things are stable, albeit soft, and I think that is enough surety for investment in the commercial and industry sectors.’’ 

POLITICAL MOOD SWINGS 

Property Council of Australia Victorian executive director Sally Capp says the commercial and industrial markets have already weathered a decade of uncertainty. 

“Change is the new norm and we have almost become acclimatised to political disruption since former PM Kevin Rudd’s exit,” Capp says.

“Because there is still high demand for property investment and because it’s very competitive in traditional property investment, people are diverting away from traditional asset classes and into industrial and logistics.”

McCrindle agrees: “We have had a good number of years now, coming up to a decade, of political change in terms of Prime Minister,’’ he says. “So I think it’s something business is used to. It doesn’t want it, it doesn’t like it, but it will accommodate.”

“The change in government and PMs in the last decade hasn’t been the source of the softer confidence, so I don’t think will affect things. The two main parties from a business perspective are very aligned. I think there is no great implications of that.”

Analysts say Melbourne and Sydney’s commercial property markets are bubbling along so well that the only concern is whether there will be enough stock to satisfy demand in the future.

THE TRUMP FACTOR 

The new leader of the free world might be polarising opinion, but it’s having only a limited effect on Aussie markets - a trend that analysts tip will continue.

CBRE senior director head of research Stephen McNabb says it is unlikely that Australian interest rates will follow the US rises that followed Trump’s entry into the top job.

“You wouldn’t expect (interest rates would rise) in a hurry because the economy is well below trend and inflation is only just moving into the RBA target band,” McNabb says.

“We are sufficiently de-coupled from the US environment in the short-term.’’

THE KEYS TO ASIA  

Australia is increasingly being recognised as a major player within the Asian market and this will strengthen throughout this financial year.

“Particularly in the industrial sector we have a lot of infrastructure investment, in terms of our roads and rail, which is going to help the logistics side and really reinforce the benefit and opportunity to service our market in Asia,” McCrindle says.  

“Our role in the region has shifted from a simple recognition that we are well located, through to a real ability to service those ever growing needs.”

It’s evident in the kind of regional development evolving in regional centres like Toowoomba and the expansion of ports in Brisbane and Melbourne. 

“A commitment to infrastructure spending will help address the deficit that the nation has, particularly in NSW, and is very positive for commercial property,” JLL national director, head of research Andrew Ballantyne says.

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