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FOR IMMEDIATE RELEASE 4 November 2009
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Interest rate rise - the property impact
Sydney, NSW (4 November 2009)
Today’s rise in official interest rates will have the biggest impact on property syndicators and overseas
investors according to CBRE Regional Director, Institutional Investment Properties, Rob Sewell.
“The increase will certainly affect the syndication managers who are trying to deliver a certain return to
their retail investors,” Mr Sewell said.
Offshore investors will also be hit given the double whammy of rising interest rates and the recent
increase in the $A.
“Overseas funds that need to borrow to offset their currency hedging will be impacted,” Mr Sewell said.
“While this will not affect the closed end funds, it will have an impact on the open ended funds that have
been increasingly active in the Australian market.”
However, Mr Sewell said the premiums that banks were charging were beginning to ease for preferred
customers and this would “take some of the sting out of today’s interest rate rise.”
CBRE Executive, Global Research and Consulting, Kevin Stanley said an ongoing issue for the
commercial market was the level of lending for commercial property investment and development, which
was still well below long term averages.
“Banks are generally already overweight in lending to commercial property, so the cost of debt is not so
much the issue at the moment; lowering LVR’s is,” Mr Stanley said.
“While the re-capitalisation of some vehicles (most notably the A-REIT’s) over the last twelve months has
allowed for a reduction in debt, low and in some cases still falling property values will continue to put
the squeeze on LVR’s in the short term. There’s no quick fix to the valuations side of the LVR equation. In
the meantime, the cost of debt is mostly of academic interest only.”
On the residential front, CBRE Regional Director, Residential Mortgage Valuations, Tom Edwards said
the rate increase should not have too much impact on the current level of sales activity.
4 November 2009
“Any intending purchasers would have built the interest rate increase into their decision and today’s
increase should not have too much impact on the current level of sales activity” Mr Edwards said.
About CB Richard Ellis
CB Richard Ellis Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los
Angeles, is the world’s largest commercial real estate services firm (in terms of 2008 revenue). The
Company has approximately 30,000 employees (excluding affiliates), and serves real estate owners,
investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CB Richard Ellis
offers strategic advice and execution for property sales and leasing; corporate services; property, facilities
and project management; mortgage banking; appraisal and valuation; development services; investment
management; and research and consulting. CB Richard Ellis has been named a BusinessWeek 50 “best
in class” company three years in a row and a Fortune 100 fastest growing company two years in a row.
Please visit our Web site at www.cbre.com.