commercial rents 'set to double'

Commercial rents 'set to double' SIMON JOHANSON
July 26, 2010


COMMERCIAL property rents will double and residential property prices will rise by up to 30 per cent over the next three years, a respected economist has said in a bullish forecast for the economy.

Speaking at a Real Estate Institute of Victoria lunch, BIS Shrapnel's chief economist, Frank Gelber, said the global financial crisis had done the Australian economy a ''huge favour'' by crimping risks in the market.

''We're not overgeared, we're not overvalued and we're not oversupplied,'' Dr Gelber said.

Advertisement: Story continues below''I can't remember in the last 30 years a time when I have been more comfortable and optimistic about investment in the market.''

Problems in Europe and America were unlikely to affect Australia's economic outlook.

''Our recovery now is already well entrenched and they won't stop it.''

Australia's commercial property leasing markets will continue to tighten while banks restrict lending to builders and developers. This would push up rents to the point where building activity starts again.

As the economy continued to strengthen and capacity increased inflation would become a concern.

''In our long-term forecast report we've got cash rates going up another [2 percentage points] over the next three years and housing interest rates above 9 per cent and that may turn out to be moderate.

''At the end of the day, we haven't got a bubble in our residential market. We're undersupplied, not oversupplied [House] prices will go up another 30 per cent over the next three years.''