Investing Perks | Commercial Property
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What is this episode about and who is the guest from Rethink Investing?
It's The Real Estate Podcast, brought to you by Ray White, the largest real estate and property group in Australasia.
And welcome to another episode of The Real Estate Podcast, available on iHeartRadio, also on Spotify and Apple Podcasts, or wherever you get your podcast from. Well, it's a Thursday again already and the 14th day of April for 2022. Coming up in just a moment, Scott O'Neill is here from Rethink Investing. And one of the questions we're going to be looking at are some of the perks of depreciation in commercial property, which is pretty important if you're looking to invest in commercial property. But first, let's have a look at the main centre weather forecast.
It's the main centre forecast with propertybuyer.com.au.
And looking at weather for Sydney, expecting a possible shower with 23 degrees. Melbourne, mostly fine with 25. Brisbane, one or two showers today expect a high of 25 degrees. And in Perth, expecting a high of 27 and mainly fine and sunny.
Across every state, city and town of Australia, The Real Estate Podcast.
How are national rental trends and yields moving in Q1 2022?
Well, CoreLogic's quarterly rental review for the first quarter of 2022 has been released and shows the National Rental Index increased 1% over the month of March and 2.6% over the March quarter. Now that's a 70 basis points increase on the December quarter. But compared to the previous quarter, movements in yields are varied, reflecting the diversity in home values. Yields rose across Sydney, Melbourne and Canberra and fell across Brisbane, Adelaide, Perth, Hobart and Darwin. Brisbane recorded the largest fall in rental yields with 3.5% over the quarter, while Darwin with 6.0% continues to record the highest rental yield amongst the capitals, followed by Perth at 4.3% and Canberra at 3.8%. And at the other end of the spectrum, Sydney with 2.48% and Melbourne with 2.81%,
had a sharp decline in rental demand throughout the COVID period and recorded the lowest yields despite a small rise over the quarter.
Let's Talk Commercial, a podcast series with Scott O'Neill.
Yes, it is that time again. It rolls around pretty fast. Scott O'Neill is here from Rethink Investing. Good morning, Scott. Good morning to you, Craig. Good to be back.
How can commercial property act as a hedge against inflation?
Yes, back again. And as mentioned, we're already well into April the 14th today. One of the questions, Scott, I wanted to ask you, and this is a pretty important sort of a question to dive into, is the strategy and the formulation of a strategy to beat inflation with commercial property. It's something that if people are looking at going into commercial property, it's pretty important for them to look at.
Yeah, exactly right. So we all know one of the big benefits of property in general is leveraging. So the thing about inflation is it means $100 today, something that will cost $100 today might cost $105 tomorrow. That's not just because the cost of things are going up. It's actually the currency devaluing. So everything is affected by this. particularly commercial property where you've got high incomes, you're actually hedging your bets against inflation because you're controlling an asset, which is actually improving its value versus the currency. And also your rents would be too. So remember, CPI, Consumer Price Index, is one of the methods of raising rents. commercial property as CPI grows, so does your rent value.
So not only are you going to see currency devalue against your property's value, but it's going to devalue against the rent value as well. So you're going to be getting a win on both sides to this. Now, the only negative thing is interest rates will go up, but obviously that's only one part of the equation, one that most people focus on incredibly. as well. You've got to look at all parts of the equation. Why is currency devaluing? One way of hedging your bets is to buy a property and doing it in a high cash flow manner, like buy through commercial property. It's a very smart strategy to not have the worries of inflation like you would in others.
And yesterday morning, Scott, I was talking with Damien Cooley just in terms of the auctions and the number of people and the active bidders and that going a little bit soft, a little bit quieter.
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Chapters
5 chapters
1
What is this episode about and who is the guest from Rethink Investing?
0:02–1:17
2
How are national rental trends and yields moving in Q1 2022?
1:17–2:45
3
How can commercial property act as a hedge against inflation?
2:45–5:29
4
Why does commercial property deliver stronger cashflow compared to residential?
5:29–8:30
5
What is the current demand and stock situation in the commercial market?
8:30–9:30
Speakers
3 identifiedMore from Aussie Real Estate Podcast
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Australia Housing Market Stability: Low Mortgage Arrears and Minimal Negative Equity Explained
Australia Property Prices Rising: Construction Costs, Materials and Fuel Driving the Market