Industrial, Hotels, and Alternatives Top 3 on Investors’ Wish List
According to leading agency Savills Australia’s Spotlight on 2024 Report, industrial, hotels, and alternatives will be among the most popular asset classes in 2024, as greater clarity around the interest rate outlook and further pricing adjustment drives a recovery in investment activity. Savills expects that ongoing strong population growth and a recovery in tourism will continue to boost consumer demand, supporting demand for space in the industrial, retail, and hotels sectors.
Residential investment, including the emerging build-to-rent (BTR) sector, will become increasing attractive as population growth, coupled with limited supply of housing, drive an acute shortage of housing. Strong investor interest in student accommodation is also expected in 2024, says Savills, driven by the rebound in international student flows.
“The sectors that are benefitting the most from tailwinds are industrial and logistics, hotels, multi-family residential and student accommodation, and these sectors remain attractive to investors due to robust population growth, and the rebound in tourism and international education,” said Chris Naughtin, National Director, Capital Markets – Research at Savills Australia & New Zealand.
2024 & beyond: Slowing growth and inflation will see central banks pivoting to rate cuts
The Savills Spotlight on 2024 report predicts the global economy will slow next year but avoid a hard landing while inflation continues to moderate. In Australia, inflation will slow but remain sticky, with population growth adding to services price pressures and housing costs. While the RBA is expected to lag other major central banks in cutting interest rates, economists generally expect several cuts in interest rates towards the end of next year, with an expectation that the cash rate will be at 3.85% by the end of 2024.
Despite the general expectation of a shift to lower rates by late next year, rising volatility in bond markets points to the difficulty pricing the probability of interest rate cuts. Yields on 10-year Australian and US government bonds declined by around 40bps during the first three weeks of November after having risen by nearly 100bps over the three months to October.
“The exceptional volatility in bond markets in recent weeks highlights the potential for rapid and abrupt changes to the outlook,” Mr. Naughtin said.