Property professionals think debt will become easier to access

National Australia Bank’s (NAB) Quarterly Australian Commercial Property Survey for the fourth quarter of 2023 has found that property professionals believe loans and equity are becoming less difficult to acquire.

Around 300 respondents from the real estate, property development, and fund management sectors were surveyed about their forecasts and sentiments towards the commercial property sector.

According to the report, released on Thursday (22 February), the number of surveyed property professionals who believe it is harder to obtain loans and equity continues to exceed those who said it was easier.

However, the ease of acquiring debt remained “relatively unchanged” in Q4, according to the report, stabilising at -35 per cent. While this remains below average, those who reported that it was harder to obtain loans decreased from -26 per cent in Q3 to -22 per cent in Q4.

Notably, the NAB survey found that sentiment was improving for the future.

Perceptions about the relative ease of accessing finance in the upcoming three to six months rose 4 points to -31 per cent.

Despite this, intentions to source capital for new developments were weaker than in the same period last year – and unchanged from the previous quarter (with 63 per cent stating they had no intention to source funding in the short term).

Just 19 per cent of respondents said they would look to source capital to fund new developments in the next three to six months, down from 21 per cent last quarter, while a quarter said they would seek capital in the next six to 12 months (stable on the previous quarter).

Commercial market sentiments

Overall, the NAB survey found that market sentiments in the commercial property sector improved in Q4, rising 10 index points (ips) to -6. However, NAB acknowledged that these were still “weak” and “below average”.

The major bank reported a rise in confidence from respondents long term, though, with the projected 12-month measure scoring at positive 3 ips, according to the survey. Confidence for the next two years increased even further to 16 ips.

The property index rose by 28 ips (up to 38 ips) for the CBD hotel industry, the largest gain over all industries considered in the survey. The industrial sector, which had the highest index score, rose 19 ips, up to 49 ips in Q4.

The office and retail market index had smaller increases, rising 6 points to -32 ips in the office sector and 2 points to -32 ips in retail. The report stated that there was a rise in confidence over short and long-term periods for all sectors, excluding CBD hotels, which dropped to -25 ips in consumer expectations over the next two years.

The commercial property market index rose nationwide except in Western Australia, which was reflective of declining office and retail market conditions in the state, according to NAB.

The commercial property index was lowest in Western Australia at -27 ips after a significant reduction of 23 ips from -4 ips in Q3. This was followed by Victoria that had an index score of -26 ips (rising from -38 ips in Q3) and NSW that scored at -7 ips (rising from -17 ips in Q3).

The states that had a positive commercial property market index were Queensland at 11 ips, followed by South Australia and the Northern Territory, which both indexed at 28 ips.

All states had long-term increases in confidence in the commercial property market over the next 12 and 24-month periods.

Western Australia is expected to make the biggest comeback, with market professionals projecting a 49-ip increase over the next 24 months.