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Property Economics

Executive Summary of Property Economics

The current study deals with the analysis of the commercial property market of Sydney. Offshore capital, finance and infrastructure projects are some of the micro economical factors that contribute to the commercial property market growth within the domain. Besides, analysing the macro economical factors it can be noticed that Sydney is shaving a high vacancy rate that is likely to decrease in the coming years. Moreover, the rate of unemployment, tax and others also seems to be less and also likely to be decreasing the coming years. Apart from that, micro and macroeconomic factors are likely to create a proper balance of the demand and supply within the domain. A detailed analysis of all the factors mentioned previously has been presented in this study.

Table of Contents

Introduction.

Findings and analysis.

Critical examination of the microeconomic environment of the commercial property market in Sydney

Critical analysis of the macroeconomic environment of the commercial property market in Sydney

Critical evaluation of the property cycle.

Critical analysis of the forecast of the property market

Conclusion and recommendation.

Reference list

Introduction to Property Economics

A market condition is related to the macroeconomics and microeconomics factors that create a direct impact on the economy of a nation. Analysis of the macro and microelements of the economy within the market helps in analysing the current condition of the market. This study will focus on the analysis of Sydney's commercial property market based on the factors of macro and microeconomics. In addition to this, various economics indicator such as unemployment rate, inflation rate and others will also be used for analysis. Apart from that, the report will also be critically based on the property cycle and forecast of the property market.

Findings and Analysis of Property Economics

Critical Examination of The Microeconomic Environment of The Commercial Property Market in Sydney

Sydney's commercial properties continue its growth due to certain factors within the domain, mainly capital, infrastructure and finances. In this respect, the retail property market in Sydney continues its growth in 2020 (Cheung, 2020). Some of the technical factors act as current stability in the political environment. Besides, the recent event that took place in Hong Kong is likely to create a vital impact on the commercial property market in Sydney.

Offshore capital

As a result of the political stability and exchange rate, the commercial market of Sydney is likely to face a stable growth in the sector of offshore capital. The environment is facing an increase in the interest from the investment of Hong Kong. Besides, it also results from the ongoing protest within the nation. Apart from that, Light rail of Sydney also seems to be gaining strong attention from the Hong Kong investors. It also helps in increasing quality assets within the nation, further facilitating the aspects of demand and supply within the country. This indicates little or no shortage of capital in the current year that is 2020 (Cheung, 2020). However, most of the money will be towards the retail and office sectors.

Based on the above figure, it can be observed that low capital is likely to decrease the supply, further increasing the demand. Additionally, the quality also seems to be get affected by this concept. Henceforth, considering the current capital aspects of the commercial property market, it can be assumed that the property market of Sydney is likely to have a stable demand and supply condition.

Infrastructure project

Sydney's revitalisation project is likely to drive the significant investment in 2020. Additionally, the Atlassian also seems to be establishing a high technological precinct over the rail yards (Needham, 2020). The mentioned project is likely to create a demand for all the assets within the domain from the investors involved with it. This can also create an impact on the expanding economy within the market.

Proper project is likely to increase the capital, further increasing the supply within the market. As per the analysis of Matthews & Xiao (2019), the increase in the amount is likely to create an increasing effect on the demand curve, as stated in the above figure. This consecutively also affects the rise in the price margin within the economy.

Finance

The commercial property market of Sydney is facing a low rate of interest; this affects the property market adversely further changing the dynamic within the year. The demand for Sydney is likely to face a decrease in the rates of interest (Needham, 2020). This will help in driving more occupiers, further switching the rents for the mortgages within the commercial property markets of Sydney. Henceforth, from the analysis, it can be depicted that microeconomic factors are likely to have a direct impact on the supply and demand within the market. As per the illustration of Ben Cheikh & Rault (2017), price is also affected by the aspects of demand and supply within the market. However, the proper financial condition is likely to increase the amount within the market as it helps in proper operations of the retailers and offices. Therefore, demand is also enhanced with the increase in supply alongside the price rate also seems to be increasing at an equal pace.

Critical Analysis of The Macroeconomic Environment of The Commercial Property Market in Sydney

The segment of Sydney's commercial proper is considered to be a vast area, encompassing various projects such as hotels, retail stores, office buildings, and centres of medical care, warehouses and many others. Markets of the commercial real estate have strengthened over the years while witnessing a massive growth within the past few years. As of 2018, a particular area of land seems to get a withdrawal from the commercial market, creating a negative impact on the net supply. In the mentioned year, 55,147 sq m got withdrawn from the market depicting a net amount of –26,935 sq m (Knight Frank, 2020). In addition to this, the vacancy rate within the domain also seems to be decreasing. As of 2019, the price of vacancy includes 4.1% that is low as compared to the previous that is 2018 depicting a rate of 4.6% (Knight Frank, 2020).

Conversely, effective rent of CBD’s prime includes an increase of 15.1% in 2019. Besides, the total sales accounted for 2018 resulted in $6.48. However, the sales seem to be increasing in 2019 up to 27% (Real Commercial, 2020).

Considering the above figure, it can be analysed that the annual growth rate of Sydney's commercial market is unstable and has decreased from the past year. As of 2019, the growth rate of employment of Sydney was 2% that is lower as compared to the previous year that is 2018 reflecting a scale of 4% (Real Commercial, 2020).

As of 2019, the economic rate of growth in Sydney increased to 2.1% (Real Commercial, 2020). This includes a comprehensive scope for investing within the commercial markets. It also helps in maintaining a proper and stable economic condition within the domain.

Based on the above observation, it can be depicted that supply of the CBD areas is likely to increase in the upcoming years. The low rates of vacancy that is being faced by the CBD sector are expected to grow in the forthcoming period (Nowourynowska, 2016). However, there is an increase in the rate of interest within the domain when there is an increase in the economic condition. It is because the rise in the financial situation tends to create a positive impact on the demand and supply curve with the domain. This further leads to an increase in rents within the area. Conversely, a decrease in the rate of interest is likely to secure a natural pathway of financing (Jones, Hillier & Comfort, 2016). It also reduces the prices of commercial real estate and an increase in the aspects of production. Henceforth it depicts that increase in production is likely to decrease the costs further leading to high supply and demand.

Critical Evaluation of The Property Cycle

A cycle of property is likely to represent recurrent sequences of events in terms of economic, emotional and demographic factors that create a direct or indirect effect on the supply and demand within the market (Puah et al. 2016). It helps in characterising different aspects a market goes through.

The property cycle involves four different stages for characterising the various aspects of the market. As per the analysis of He et al. (2016), the first stage characterised by Boom involves three issues including tradespeople shortage, the hype of the media that is consists of more buyers than the sellers and yields of low rent. The second stage indicating slow down is characterised by a crisis of affordability, an oversupply of the stock, and prices of falling construction. Furthermore, the third stage showing slump consists of an abundance of the trade’s people, fall of value, more number of sellers than the buyers and more confidence (Zhu et al. 2018). Lastly, the stage of recovery the last and final step involves an increase of the rentals, tightening of stock level, the rise of the value and growth of the price.

Considering the current condition of the commercial market of the property of Sydney, it can be analysed that the currently Sydney is in the recovery stage in the property cycle. It is because the price of the goods and services within the domain seems to be increasing with an increase in the value (Marzuki, 2018). Besides, there is also an increase in the rental aspects within the domain.

Critical Analysis of The Forecast of The Property Market

The retail sector of Sydney is likely to grow within the 5 years from the current one. As of 2019 to 2023, the retail industry of Sydney is expected to grow by 1.8% (Dabu, 2020). Besides, the growth of the retail sector, the GDP rate of the commercial market of the domain is also likely to grow within the mentioned period. From 2020 to 2024, the GDP rate of the country is expected to grow by 2.7% (Dabu, 2020).

Considering the current situation of CBD rate of Sydney, it can be assumed that the price will be increasing in the coming years. Secondary rents as of 2021 are likely to result in $900 power m sq. Conversely, the first rent is expected to result in $1500 per m sq as of 2021 (Dabu, 2020).

Considering the current rate of vacancy within the domain, the price is assumed to be decreasing in the coming years. It can be assumed that as of 2021, the price will be below 4% (Cheung, 2020). Having an analysis of the current commercial market of Sydney, it can be depicted that the economic condition is likely to increase in the coming years. This will adversely create a positive impact on the rents and other markets condition. Consecutively, the supply alongside the demand within the market will also be increasing, creating a broader scope of development. Nonetheless, the rate of vacancy will be decreasing in the coming years that furthermore imply a positive condition within the economy of the nation (Sisson, Rogers & Gibson, 2019). Henceforth, the forecasted growth of the commercial market of Sydney is showering a definite curve, further creating a full scope of investment and a positive impact on the supply and demand within the domain.

Other than that, the rate of interest in the mentioned area is also likely to fall in the coming years. However, based on the above observation, the stock of investment is expected to have an attractive position within the market. Alongside, the international visitor of Sydney seems to be increased by 2.8% resulting in 8.6 million as of 2019. Additionally, the domestic visitor also increased by 11.7% resulting in 113.3 million (Cheung, 2020). Considering this figure, it can be assumed that the visitors from international context and domestic content are also likely to be increasing by 3% and 12% respectively (Cheung, 2020).

Conclusion and Recommendation on Property Economics

From the above-mentioned aspects, it can be concluded that the macro and microeconomic conditions of the nation seems to be having an unavoidable effect on the demand and supply curve within the domain. Increase in the economic situation seems to be having an increase in the supply curve, further increasing the demand and price of the products. However, considering the commercial market of the property of Sydney it can be evaluated that the vacancy rate, rate of employment and other economic instances within the domain is having a stable condition that does not seems to be impacting the demand and supply curve within the domain negatively. However, it is also assumed to be increasing in the future, further having a low vacancy rate. These indicate a positive instance for the nation. Besides, as per the property cycle, the commercial market of Sydney is in the fourth stage, reflecting an increase in the price, value and stock.

References for Property Economics

Ben Cheikh, N., & Rault, C. (2017). Investigating first‐stage exchange rate pass‐through: Sectoral and macro evidence from euro area countries. The World Economy, 40(12), 2611-2638. Retrieved on 25 May 2020, from: https://www.econstor.eu/bitstream/10419/155608/1/cesifo1_wp6366.pdf

Cheung, A., (2020). Sydney’s commercial property market has so far avoided collapse but there ‘no quick fixes’, warn experts, Commercial Real Estate. Retrieved on 25 May 2020, from: https://www.commercialrealestate.com.au/news/sydneys-commercial-property-market-has-so-far-avoided-collapse-but-there-no-quick-fixes-warn-experts-952281/

Dabu, B, (2020). Property Markey update, Sydney, Smart property investment. Retrieved on 25 May 2020, from: https://www.smartpropertyinvestment.com.au/research/20931-property-market-update-sydney-march-2020

He, C., Liu, Y., Dong, J., Wang, Q., Wagner, D., & Bathias, C. (2016). Through thickness property variations in friction stir welded AA6061 joint fatigued in very high cycle fatigue regime. International Journal of Fatigue, 82, 379-386. Retrieved on 25 May 2020, from: https://hal-univ-paris10.archives-ouvertes.fr/hal-01687110/document

Jones, P., Hillier, D., & Comfort, D. (2016). Materiality and external assurance in corporate sustainability reporting: an exploratory study of Europe’s leading commercial property companies. Journal of European Real Estate Research, 9(2), 147-170.

Knight Frank, (2020). Sydney CBS Office market, Knight Frank. Retrieved on 25 May 2020, from: https://content.knightfrank.com/research/304/documents/en/sydney-cbd-office-market-overview-march-2019-6249.pdf

Marzuki, J. (2018). Analysis of the Performance and Diversification Benefits of the South Africa Commercial Real Estate Market. Journal of Real Estate Literature, 26(2), 291-311. 

Matthews, K., & Xiao, Z. (2019). Shadow Banking and the Chinese Economy: A Micro to Macro Modelling Framework-ESRC. Impact, 2019(1), 60-62. Retrieved on 25 May 2020, from: https://www.ingentaconnect.com/content/sil/impact/2019/00002019/00000001/art00020?crawler=true&mimetype=application/pdf

Needham, J., (2020). Three factors are tipped to keep Sydney’s commercial property market growing in 2020, Commercial Real Estate. Retrieved on 25 May 2020, from: https://www.commercialrealestate.com.au/news/trends-and-predictions-for-sydneys-commercial-property-market-in-2020-919364/

Nowourynowska, U. (2016). Macro and Microeconomic Factors of Investment Efficiency of Open Investment Funds in the Period of 1997-2015. Transformations in Business & Economics, 15(3), 39. 

Puah, C. H., Kuek, T. H., Arip, M. A., & Wong, S. S. L. (2016). Forecasting property market dynamics: Insights from the property cycle indicator. International Information Institute (Tokyo). Information, 19(6B), 2225. Retrieved on 25 May 2020, 

Real Commercial, (2020). Sydney Commercial Property News, Commercial news. Retrieved on 25 May 2020, from: https://www.realcommercial.com.au/news/tag/sydney

Sisson, A., Rogers, D., & Gibson, C. (2019). Property speculation, global capital, urban planning and financialisation: Sydney Boom, Sydney Bust redux. Australian Geographer, 50(1), 1-9. 

Zhu, Y., Wang, J., Zhang, F., Gao, S., Wang, A., Fang, W., & Jin, J. (2018). Zwitterionic nanohydrogel grafted PVDF membranes with comprehensive antifouling property and superior cycle stability for oil‐in‐water emulsion separation. Advanced Functional Materials, 28(40), 1804121. 

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Property Economics Assignment Help

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