Banks Safer Than Houses For Most

Sydney Morning Herald

Saturday September 13, 2008

Carolyn Cummins

THE recent interest rate cut and more stability in the price of petrol have raised consumer spirits, say property researchers.

But the champagne is still on ice as investors put money into high-yield savings accounts and traditional, rent-paying property.

Figures from the Bureau of Statistics show consumer sentiment rose 7 per cent in September, after a 9.1 per cent lift in August - the biggest back-to-back gain in two years.

Craig James, the chief equities economist at CommSec, said most people believe the wisest place to put extra savings is in the bank, followed by paying off loans.

He said ABS data showed new lending commitments fell for the sixth straight month in July, by 1.3 per cent, and banks now accounted for over 88 per cent of all new loans.

"The rate cut has put more smiles back on people's dials, but it's clear that we're not about to party just yet," Mr James said.

"Uncertainty about the outlook for interest rates, the sharemarket, house prices and the cost of petrol are all weighing on our minds, affecting spending and borrowing decisions."

As discretionary spending falls, smaller retailers will be hardest hit, the executive director (funds management) of LandMark White, Michael Este, said.

"This will most likely result in an increase in vacancies, particularly within retail centres. Therefore, returns for retail centres will be focused on anchor tenants, putting more pressure on retail yields over the next six to nine months. This represents opportunities for cash-rich property investors or trusts with limited gearing."

Mr Este predicted more cash would flow into traditional properties that were buffered against financial market fluctuations.

The national research director at LMW Group, Vanessa Rader, said retail rental growth had gained from higher retail turnover in the past five years, but the outlook had softened with the decline in sentiment.

"Over the last five years, total average prime rents have increased on average by more than 4 per cent per annum," she said.

LandMark White reported that prime average retail yields had increased in NSW over the past six months, and the total retail average yield was 7.08 per cent, an increase of more than 50 basis points since December.

© 2008 Sydney Morning Herald

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