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Will the rise in construction costs affect the demand for commercial properties?

Commercial property presents enormous opportunities for investors in cities like Melbourne and Hampton. One major reason behind investing in commercial real estate is its higher return on investment over residential properties. While eyeing a good yield, a potential investor should consider how much their investment is worth now. The value of commercial real estate depends on several factors. Depending on the construction cost, the price of commercial real estate can change.

The setbacks caused by the COVID-19 pandemic are somewhat persistent across the Australian economy as the inflation level continues to surge. ABS (Australian Bureau of Statistics) reported the inflation rate in 2022 at 7.3% in the September quarter, which is a 1.2% surplus of June’s figure. The many industries hit by the growing inflation include the real estate market. The direct effect of inflation in the Australian real estate market can be seen in the growing cost of construction. Across major Australian states like Victoria, construction cost is rapidly increasing, as per the 2022 CCI report.

When the cost of construction goes up, the price of the commodity goes up by default. How does this impact the demand for real estate properties across major cities like Hampton and Melbourne and its suburbs? If you are a property owner, tenant, or commercial investor looking for industry news on the commercial real estate of Hampton, Melbourne, and its surrounding areas, be sure to follow Axis Property.

Axis Property is one of a kind boutique commercial real estate agency serving greater Melbourne for years. They manage hundreds of properties in those areas ranging from commercial, retail, industrial, and medical to residential properties. When it comes to real estate in Melbourne, Axis Property is easy to trust and work with, given their years of industry experience, work ethics, professional approach to every client, and local experience in Melbourne’s real estate market.

The Ugly Side of Rising Construction Cost

Cities like Melbourne and Hampton are the constant target of investors looking to capitalize on such cities’ robust commercial real estate. Major Australian cities like Melbourne are home to world-class infrastructures, a strong economy [4], and a job market, offering endless opportunities for market expansion. These key drivers of commercial real estate in Melbourne and its surrounding areas make it a top pick for investors.

On the flip side, investing in commercial property in such cities is no walk in the park. While cities like Melbourne and Hampton have a greater affinity from both local and offshore investors, prices of commercial real estate in suburbs of Melbourne, including Hampton, are higher when you compare them to those in regional areas. The price of commercial real estate can go higher with the increasing cost of construction. If you are an investor, the cost of construction can be an underwhelming factor for you at present.

The upward trend in construction costs puts immense pressure on commercial real estate prices. Property owners quote a higher price in times when the cost of construction sees a hike to cover the overall cost of construction and ensure a proper valuation of their property. This, in turn, increases the traction of buyers in accessing funds forcing burgers to back out on a potential purchase. In the long run, this will negatively impact Australia’s overall demand for commercial real estate.

When the investment is high, every real estate investor wishes to future-proof their investment when they pour big chunks into commercial real estate. Studying the current market scenario is the only way to future-proof your investment in commercial real estate in Melbourne, Hampton, and its surrounding areas. For a better market analysis and understanding, you can get help from Axis Property.

Axis Property is ready to help you with all kinds of property management services, from listing your property in the market to finding the right buyer and governing regular maintenance until the property is sold. The doors of Axis Property are always open for you, whether you are a seller, buyer, or tenant.

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