12% property profit

09 March 2016 by News Desk   |   SHARE  

The residential housing boom in Australia is slowing down but commercial investment can deliver a 12% property profit.

Falling rents and house prices offer depressed returns and bank deposits at 2.5% also do little to attract investors.

But up to 12% property profit can be gained through investment in commercial opprtunities.

12% property profit reflects latest figures that show Australian commercial property sales are set to exceed $20 billion for a third year in a row.

Commercial property investment increased by 32 per cent in 2015 with the number of foreign investors rising by 70 per cent.

Capital city rents recorded their slowest annual rate of growth (0.3%) in 2015. Growth of rental yields also fell to 3.5%. For commercial property, 8% to 12% gross rental yields are not uncommon.

As the residential housing market slows, particularly in Sydney and Melbourne, investors are seeking safety and a high return from commercial property.

“The Australian economy is strong with continuing growth in employment and new business start-ups,” says Darrell Todd, CEO of thinkingaustralia.

“The country needs commercial property, like offices for workers and hotels for tourists, in order to meet the demands of an expanding economy.”

Commercial property offers greater options such as office space, industrial, retail, hotels, rural and agribusiness, healthcare and retirement living.

Commercial properties involve longer tenancies, between three to 10 years, offering a stable income stream and less risk of tenant default. A residential lease is often just six months and it can be a high-churn market.

Commercial tenants usually pay all the outgoings unlike the residential market where the landlord is liable for paying council and water rates as well as property maintenance.

Size for size, commercial real estate often works out cheaper than residential property because you’re buying more physical space.

Current popular investment route is industrial and retail property below $5 million with assets priced between $1 million and $3 million.

Low cash rates are also driving smart money into commercial real estate, which is producing some good sales results for vendors and up to 12% property profit on rentals.

Australia’s commercial property market is worth around $29 billion annually.

OFFICE SALES – $17.2 billion in sales; previous year $16.7 billion; five year average $12.4 billion. 221 properties sold. Foreign investors purchased 45 percent of the stock ($7.6 billion).

INDUSTRIAL SALES – $4.8 billion in sales; previous year $5.55 billion; five year average $3.8 billion; 221 properties sold. Foreign investors purchased 36 percent:

RETAIL SALES – $7 billion in sales; previous year $7.2 billion; five year average $5.8 billion. 197 properties were sold. Foreign investors purchased 26 percent.

For expert info on buying property in Australia: Click Here

Click here for tourist info about Australia: Visit Down Under