Commercial property sales in Australia have plummeted by 65% on 2007, hitting the lowest level for 14 years.

The news comes as Australia’s statistics bureau reported that the country’s unemployment rate hit 4.4% in November and as the number of companies in Melbourne and Sydney vacating unused floor space and subleasing offices rises sharply.

Investment sales will total AU$5.9bn by the end of 2008 (£2.6bn), falling from AU$16.8bn (£7.3bn) in 2007, according to CBRE, with the biggest drop in transactions was in the retail sector, where property sales were 80% less than the year before.

Big ticket deals have dropped too, with from 29 sales above AU$100m (£45m) in 2007, to just nine transactions recorded this year, although seven of these occurred in the first half of the year.

CBRE said that the largest deal of 2008 was the sale of a 50% share in 101 Miller Street, North Sydney for AU$230.1m (£100m) back in April, while the single largest sale of last year was the 50% share sale of Westfield Shopping Centre Doncaster, Melbourne, for AU$738m (£324m).

CBRE executive director, research & consulting, Kevin Stanley said three pre-conditions must be met before sales activity gets back to the long term average, which is about 40% more than the volume of 2008.

‘First, the confidence to lend and purchase must return, the flow of debt must increase and an adjustment to pricing must occur.

‘Second, confidence in the property markets must return, from both lenders as well as purchasers.

'And this is only likely when volatility in the financial markets reduces and in the case of real estate, there’s a clearer picture of what the present deterioration in the economy will mean to the underlying fundamentals for real estate.’

Stanley said pricing must adjust to allow for sufficient risk margins to be re-introduced.

While this may have already happened in some parts of the market, especially for secondary assets, there had been little evidence for prime and larger properties, he added.

CBRE reported that capital values have fallen 10%-15% across the sectors, assuming minimal or no net income growth.