Chapter 1



Welcome to the Q1 2023 edition of Banner Asset Management’s Quarterly Property Report. Residential property prices fell by another 0.6 per cent in the first quarter but showed early signs of stabilising in March. Rents rose steeply as population growth– including renewed immigration– exacerbated the impact of a national housing shortage.



Industrial and logistics properties continued to outshine other commercial sectors as the shift to online shopping helped keep vacancy rates at historic allows. In the office sector, demand for quality space showed no sign of abating as companies sought to attract talent and maintain sustainable operations.

Like other countries, Australia is experiencing a slowdown in economic growth that may impact business and consumer decision-making in the months ahead.

This quarter’s Spotlight section provides an in-depth analysis of the demographic changes that are reshaping the nation’s property market. A surge in new immigrants following the reopening of Australia’s borders and its existing ageing population is driving demand for different kinds of housing to those that were previously popular.

We hope you find these insights useful.

Chapter 2

Economic Update


Australia’s economic growth has moderated with the latest official data showing gross domestic product (GDP)increased by 0.5% in the three months through December1, down from 0.7% in the previous quarter.

It was the fifth consecutive increase in GDP, though the second quarter in a row in which growth has slowed. Annual growth has also declined to 2.7%2 from the robust 5.9% recorded in September last year when the economy rebounded from the low base registered during COVID lockdowns.

The December quarter figure was below trend and broadly in line with population growth, which implies that GDP per capita was flat, according to the Reserve Bank of Australia.3

The biggest drivers of quarterly GDP numbers were final consumption and net trade4. However, consumption growth has slowed and the RBA has noted the bounce-back in spending following the pandemic has largely run its course. Higher interest rates, falling housing values and cost of living pressures are weighing on house hold budgets.5

Net trade contributed 1.1 percentage points to GDP, as exports increased 1.1% and imports fell 4.3%. Services exports, in particular, rose as tourists and international students returned to Australia following previous border closures.


GDP rose by 0.5%
in the December quarter.
GDP rose by 0.5%
in the December quarter.
The unemployment rate
remained low at 3.5% in December.
The unemployment rate
remained low at 3.5% in December.
The RBA lifted interest rates
twice in the March quarter to 3.60%.
The RBA lifted interest rates
twice in the March quarter to 3.60%.
Australia's population growth
accelerated to 1.6% in the year
to September 2022.
Australia's population growth
accelerated to 1.6% in the year
to September 2022.

  1. ABS (2023, March 1), “Economic activity increased 0.5 per cent in December quarter” [Press release]
  2. ibid
  3. RBA, (2023, March 7), “Minutes of the Monetary Policy Meeting of the Reserve Bank Board”,
  4. ABS, “Economic activity increased 0.5 per cent in December quarter” [Press release]
  5. RBA, (2023, March 7), “Minutes of the Monetary Policy Meeting of the Reserve Bank Board”,

Rate hikes continue

The RBA continued to raise official rates in the March quarter, announcing two 25 basis point increases that pushed the target cash rate to 3.6% after 10 consecutive hikes.6

It subsequently paused rate hikes in April after recent banking system problems resulted in a reassessment of the outlook for global interest rates, though it indicated this does not mean rate increases are over.

Inflation rose by 8.4% over the year to December7 and the RBA’s central forecast is for it to decline this year and next, to be around 3% in mid-2025.8

In a statement accompanying the central bank’s monetary policy decision in March, RBA Governor Philip Lowe reiterated that it is seeking to return inflation to its 2-3% target range while keeping the economy on an even keel. He also reinforced that “the path to achieving a soft landing remains a narrow one”.

Growth over the next couple of years is expected to remain below trend and the RBA forecast is for GDP growth of around1.5% in 2023 and 2024.9

  1. RBA, “Cash Rate Target”,
  2. ABS (2023, March 29), “Monthly Consumer Price Index Indicator”,
  3. RBA, (2023, April 4), “Statement by Philip Lowe, Governor: Monetary Policy Decision”,
  4. RBA, (2023, February), “Statement on Monetary Policy”,

The numbers

Annual GDP growth falls from COVID rebound

2.7% decrease of 3.2%

source: ABS

Quarterly GDP growth eases

0.5% slight decrease of 0.2%

source: ABS

Unemployment rate remains low

3.5% unemployment rate

Source: ABS

RBA Cash Rate Target

3.6% Cash Rate increases by 0.25%

source: RBA

Chapter 3



The March gain was driven by a tight rental market and renewed migration, with Sydney recording the biggest increase in prices over the month (1.4%).2

On an annual basis, national prices were 8% lower than the same period last year –though most housing prices remain higher than at the onset of COVID-19 in 2020.3

Listings are lower than the previous five-year average in every state capital city other than Hobart but auction clearance rates are rising back to average – if not above average in some cities.4

It is unclear if the gain in March will transpire into a longer-term trend of rising prices as the full impact of higher interest rates on household budgets has yet to take effect. Slowing economic growth may dent consumer confidence in the months ahead.

Hans Wibawa

Investment Analyst

National dwelling values fell by 0.6% overall in the first quarter but showed early signs of stabilising in March by recording the first monthly gain (0.6%) since April 2022, according to CoreLogic.1

  1. CoreLogic (2023, April 3), Hedonic Home Value Index [Press Release]
  2. ibid
  3. ibid
  4. ibid

Renting housing shortage continues to drive rent prices up

Fixed rate ‘cliff’

Higher interest rates are expected to take slightly longer than usual to impact all mortgage holders due to the number of borrowers who took out ultra-cheap fixed rate loans during COVID-19.

According to the RBA, the value of fixed rate loans increased substantially during the pandemic to peak at 40% of outstanding housing credit in 2022, or roughly twice their usual share.1

The central bank estimates that 880,000of these loans will be reset this year and another 450,000 loans in 2024.2 This ‘fixed rate cliff’ means borrowers will face large increases in repayments when their current loans expire, though the actual impact will vary depending on individual circumstances.


Unit rents soar highest

A shortage of rental housing combined with population growth and renewed immigration after COVID-19 continues to force rents higher in big capital cities, while rental growth in smaller capitals is slowing.

Unit rent is growing at a materially faster rate than other properties, according to CoreLogic, as more tenants seek out medium-to high-density dwellings instead of more expensive houses. A surge in international students and other migrants after Australia’s border reopening is adding to rental demand in inner city areas and university precincts.3

Both Sydney (5.3%) and Melbourne(4.3%) experienced a record quarterly rise in unit rents in the first three months of the year. The annual pace of rental growth for units in Sydney (18.1%) is now almost double the growth recorded for houses (9.4%).4


  1. RBA Bulletin (2023, March), “Fixed Rate Housing Loans: Monetary Policy Transmission and Financial Stability Risks”, Fixed-rate Housing Loans: Monetary Policy Transmission and Financial Stability Risks (
  2. ibid
  3. CoreLogic, Hedonic Home Value Index [Press Release]
  4. ibid
  5. CoreLogic, Hedonic Home Value Index [Press Release]
  6. ibid

Market snapshot

  1. Corelogic, SQM Research residential vacancy rates
Chapter 4

Industrial & Logistics

Tailwinds driving the industrial sector’s strong performance for the past few quarters are likely to persist throughout 2023

Key Insights

Tenant demand is strong, thanks to long-term structural shifts towards online retail and ecommerce. Additionally, while global supply chains are stabilising, businesses have learned their lessons on maintaining inventory levels as a safeguard against short-term volatility in supply lines.

Vacancy rates in industrial property remain at historical lows with the national average falling to 0.5% in the March quarter, from 0.6% at the end of 2022, according to Colliers.1

As in other sectors, high-quality industrial property is most in demand. According to JLL, tenants are seeking spaces with ESG credentials that are adapted for automated processes2 and this is encouraging investors with older buildings to consider redeveloping to meet the market.

Meanwhile, high construction costs and restricted material availability are curbing speculative developments. Pre-lease transactions accounted for 41% of all deals over the first quarter of 2023 and 66% of the 2023 pipeline is already pre-committed, CBRE’s data shows.3

The undersupply is pushing face rents higher and incentives lower in both prime and secondary grade markets. Colliers is now predicting 15% rent growth in 2023 after stronger-than-expected rent growth in the first quarter of the year.4

  1. Colliers (April, 2023), “Australian Industrial &Logistics Snapshot, Q1 2023”,
  2. JLL (2023, March 10), “Why knocking down warehouses is on the rise”,
  3. CBRE (2023, April 12), “Australian Industrial and Logistics National Figures Q1 2023”,
  4. Colliers , “Australian Industrial &Logistics Snapshot, Q1 2023”

Vacancy rates 1Q 2023

Source: Colliers

Super prime net face rental growth 1Q23

Source: CBRE

Market Overview


Strong demand, low vacancy rates, high rents and low incentives continue as features of Melbourne’s industrial leasing market. Many businesses have increased their on-shore inventories by 25% to 30%after feeling the effects of COVID lockdowns on their supply chains, and Melbourne warehouses have proved a popular choice among tenants looking for storage facilities, JLL notes.1 Net incentives are down across the city, with properties over 5,000 square metres recording a 10%-20% drop in incentives year-on-year in the first quarter. Face rents are up by 12%-24% depending on location, according to Cushman &Wakefield.2 Despite the strong leasing market, investor concerns about high interest rates and construction costs are tempering sales and speculative development activity, Cushman & Wakefield reports.3

Melbourne’s industrial leasing market is characterised by strong demand, low vacancy rates, high rents, and low incentives. Many businesses have increased their inventories, resulting in a popular choice of Melbourne warehouses. Investor concerns about high interest rates and construction costs are tempering sales and speculative development activity.



Vacancy rates in Sydney were at a decade low of 0.2% in the second half of 2022, according to CBRE4. This has led to rents rising at their fastest pace on record in the first quarter of 2023 – up 10% over the quarter, and 33.5% for the year, according to Colliers.5 Investors continue to be attracted by the sector’s long-term prospects. Transaction volumes eased in the first quarter to $553 million from are cent peak in the same period last year, according to Cushman & Wakefield6, but this was still well above pre-COVID levels. Prime yields in Sydney averaged 4.6% in the March quarter, according to Colliers.7

Vacancy rates in Sydney dropped to a decade low of 0.2%, causing rents to rise at a record pace of 10% in Q1 2023. Despite this, investors are still attracted to the sector, with transaction volumes reaching $553 million in Q1 and prime yields averaging 4.6%



High tenant demand coupled with delays in development in Brisbane are leading to rent increases significantly above historical trends, according to Cushman& Wakefield8. Face rents increased by 18%in Brisbane’s south and 21% in its west, while other areas continued an upward trend in rent prices that began in 2021 after five years of rental stability.9 Investors are responding to the economic environment with transaction volumes slowing from the highs of the past two years. Around $80 million worth of industrial property changed hands in the first quarter, a little over half the $150 million in transactions recorded in the same period of 2022, Colliers reports.10 Prime yields softened by 0.25% to 5.4% across the market.11

Brisbane is experiencing rent increases above historical trends due to high tenant demand and delays in development. Transaction volumes have slowed, with $80 million worth of industrial property changing hands in the first quarter, and prime yields softening by 0.25% to 5.4% across the market.

  1. JLL, (2023, March 9), “Businesses zoom in on Melbourne Warehouses”,
  2. Cushman & Wakefield, (2023, April), “Marketbeat Melbourne Industrial Q1 2023”,
  3. ibid
  4. CBRE, “Australian Industrial and Logistics National Figures Q1 2023”
  5. Colliers (April, 2023), “Australian Industrial &Logistics Snapshot, Q1 2023”
  6. Cushman & Wakefield, (2023, April), “Marketbeats Sydney Q1 2023”,
  7. Colliers, “Australian Industrial &Logistics Snapshot, Q1 2023”
  8. Cushman & Wakefield, (2023, April), “Marketbeat Brisbane Industrial Q1 2023”,
  9. ibid
  10. Colliers (April, 2023), “Australian Industrial &Logistics Snapshot, Q1 2023”,
  11. ibid
Chapter 5


Tenant demand for quality office space persists

The shift towards quality assets was highlighted by a CBRE Research report which analysed 220 tenant relocations in the two years prior to March. It found 66% of those tenants had moved to a building with a higher rent than their previous premises, while only 24% had opted for abuilding with a lower rent.1

Colliers reported a strong quarter of CBD activity with over 57,000 square metres of office space leased via 111 deals – almost triple the area leased in the same period last year. However, it also noted that economic uncertainty may lead to a more cautious approach by tenants in the months ahead.2

Prime gross effective rents rose in most capital cities over the March quarter, though Melbourne rents were an exception and remained flat, according to Cushman and Wakefield.3

Andrew Turner

Founder and CEO

A focus on quality assets continued to play out in the March quarter as factors such as ESG demand and the war for talent benefited prime office space over the secondary market.