Commercial Property To Be Impacted Less By Higher Interest Rates

Rising interest rates are less likely to impact commercial property compared to residential, according to the RBA.

Head of Domestic Markets at the RBA, Jonathan Kearns, said commercial property could potentially act as an inflation hedge.

“If commercial property was seen as a hedge against inflation, then an increase in interest rates because of higher inflation could reduce risk spreads and result in less downward pressure on commercial property prices from higher interest rates,” Mr Kearns said.

“All up, simple estimates suggest the fall in commercial property prices in response to higher interest rates appears to be slower, and slightly smaller in magnitude, than for residential property — although this could reflect the greater difficulty in measuring timely commercial property prices,” Mr Kearns said.