STATE OF THE MARKET
I attended the joint Australian Property Institute-Real Estate Institute of Victoria “State of the Market” seminar yesterday in the inspiring BMW Edge Theatre at Melbourne’s Federation Square.
I often find myself cringing throughout hubristic keynote speeches delivered by this or that bank chief economist at these six-monthly professional gatherings. As the GFC slowly loomed onto the horizon, they continued to regale us with charts and data purported to proclaim how strong and invulnerable the Australian economy is. Never a mention of the incredible $2.4 trillion real estate bubble into which Australian real estate had developed, nor of the $670 billion or so in debt that will have to be wiped off, making our big four banks tremble at the knees.
At a dinner function about a year ago, I mentioned to Chris Plant, Victorian President of the Australian Property Institute, that I usually have to grit my teeth throughout many of these episodes, reminding myself that I need my continuing professional development points to total at least 20 by the end of the year. I’ve found there’s never a heterodox view permitted within the real estate industry, and the “State of the Market” presentations are upbeat to a fault.
However, while Westpac’s senior economist, Matthew Hassan, didn’t mention Australia’s real estate bubble (the biggest in the world incidentally), he gave an excellent presentation yesterday. It was laced with a number of meaningful charts, clearly explained. This can be no V-shaped recovery, Matthew suggested: there is unsustainable debt to come to light in the US which virtually ensures we may expect a ‘double-dip’, or ‘W-shaped’ recovery.
Hallelujah, Matthew! You said it like it is, and the conclusions you drew from your research seemed pretty solid to me. And you know what? (as Keven Rudd would say), I’m sure the packed audience appreciated your research and lack of BS.
Tony Crabb, Director of Investment Strategy at Savills, gave an optimistic account of the outlook for commercial, retail and industrial property in his inimitably smooth fashion, while Tim Church, head of real estate at UBS, opined that Australian real estate investment trusts seemed primed to climb back out of the hole into which they’d recently descended.
When I couple my barometer of the economy with the data presented by Matthew Hassan, however, as much as I’d like to believe Tony Crabb and Tim Church’s optimism, I have a feeling they were wearing the industry’s usual rose-coloured specs yesterday.