Is the Australian commercial property market at risk of a ‘property bubble’ just like the residential market?

The Australian property market has long been considered one of the most stable and efficient in the world – investors were always willing to invest in Australian properties. However, this has changed since the pandemic. In 2020 both residential and commercial property in Australia took a dip. However, luckily, they both started making their way back in 2021.

The residential property market has been booming since the beginning of 2021; both confidence and demand are rising consistently. If it continues to grow at this rate throughout 2021, the residential property market will quickly recover from its losses last year due to the pandemic.

However, experts suggest that residential property is showing indications of a bubble risk. A property bubble is when buyers bid up the property’s price until it reaches beyond actual value. Eventually, the bubble bursts, which means the demand falls, prices crash, owners and investors can face a considerable loss. While experts have discussed it, they don’t believe this will be the outcome during 2021.

So, naturally, that leads to investors involved in the commercial property becoming concerned about the commercial property rise, equalling a bubble risk in a few years.

 

 

Well, there is some relief for those people; the commercial property market is not moving close to a bubble risk. This is because commercial property demand has not increased and recovered the same way that residential property has, even though confidence in commercial property is rising.

From the previous quarter, as seen in June, confidence in Melbourne’s commercial property sector is now above pre-pandemic levels. Investors are once again willing to invest in a commercial property, even though the demand hasn’t reached residential demand levels.

One of the primary reasons why the demand is still low is many people are still working from home and not going back to offices. Several companies have entirely changed their working arrangements, including permanent working from home, which has decreased the long-term need for commercial property.

Another reason is the continued lockdowns that are happening now and then. The situation is still uncertain, and many investors want the certainty of profit gain before investing.

 

While for some, the commercial property market seems risky and unpredictable, we cannot deny the rise in confidence that will soon follow a surge in demand. At this point, it’s a long-term game, and investors need to hold onto the cheaper commercial property until Melbourne returns to its regular glory.

If you are a business, or investor looking to purchase a commercial property at the moment, you will need help and advice from the experts. This is why you need the team at Axis Property.

Axis Property is a boutique property management company with the proper knowledge, experience and experts to help you with any property deal. Your needs are handled personally to ensure you are getting the best deal property. If you are looking at a commercial property, get in touch with them today.