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1.Market Observations, 8.Was Sticky

2 May 2017 (AFR) – Commercial property heading for a peak, but no crash

(2 May 2017, AFR, p31, by: Larry Schlesinger, Nick Lenaghan, Su-Lin Tan)

Commercial property values‘The sale of a major Sydney office tower on a record low 4.6 per cent capitalisation rate has reignited concerns about a commercial property bubble building, with the Reserve Bank further warning about the sustainability of current pricing in its Financial Stability Review and bank regulator Wayne Byres joining the chorus. As the rate of yield compression slows, landlords and analysts argue the risk of a crash remains low with the wide spread between property yields and government bond rates combined with the prospect of very strong rental growth in Sydney and Melbourne providing a solid buffer to satisfy investors should bond rates start rising.’

Read more (and see the graphs of property values, yields, etc.) at AFR.com (might need AFR login access, or try: AFR.com/trial)

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