Commercial property doing well, retail softening, but property still standout of Oz economy: Avdiev

Commercial property doing well, retail softening, but property still standout of Oz economy: Avdiev
Commercial property doing well, retail softening, but property still standout of Oz economy: Avdiev

With elections announced for July 2, domestic gripes are back and Australians are facing a few weeks of spin from polarised think tanks, economists and shock jocks, according to Rita Avdiev, managing director of the Avdiev Group.

In Oz, the economic divide is between the healthy service sector economies in the East and the hard yakka states where falling commodity prices bring rising unemployment and property value collapse. 

The property bubble

"It’s back, the slow leak mended by the Reserve Bank," she writes in a post on avdiev.com.au.

The RBA has dropped interest rates to a new low, great for borrowers, especially negatively geared investors, but another blow for self-funded retirees. What will be the unintended consequences on investor behaviour? What impact on welfare needs?

The negative gearing debate is continuing. Removing it was tried and abandoned in the mid-1980s, but that was too long ago for the lessons of history to be remembered. The current government intends to keep it. 

According to Rita Avdiev, it was a win for the property industry which has been the stand out performer of the Oz economy.

"We’ve done well in the pay stakes too. Salary rises in other markets have been low to negligible, property is well ahead."

Although the 2016 Avdiev Property Industry Report findings show a 3% median rise overall, under the surface there are stand out market sectors where shortages are severe and the attraction and retention strategies aggressive. Contributors reported massive pay increases and forecasts in development and building companies, for development managers, project managers and architects with 3-D modelling software skills, all in short supply.  

There’s been lots of action at the top of the property food chain – the major listed property funds, she says. Profits are up, foreign investment continues. Amalgamations, joint ventures and a spectacular but unsuccessful takeover attempt has resulted in resignations and renewal in the senior echelons of both companies. 

Commercial property is doing well, spare space capacity is being absorbed, especially in Sydney. 

Retail is softening - unseasonal weather, consumer sentiment and sluggish sales impact on rents and yields. Regulation, the availability of local finance and a potential slowdown of foreign funds are a worry for developers, especially for the seasoned ones who have seen it all before.  But hope springs eternal for the young ones, they are joint venturing with their sources of capital and looking ahead.

Real Estate has been super busy, at the big end of the property market, and in residential as well. But listing on the stock market is a brave move and does not guarantee success, even if it’s a large franchised residential network and a well known brand name. Time will tell.

The built environment consultants in the active market sectors of property are doing well, but a recent study of business conditions for architects in South Australia tells a tale of woe – fee cutting, low salaries, not enough work. They are not unique, similar conditions exist in other states too, depending on opportunity, specialisations and feral tendering competition.

The Sydney v Melbourne rivalry is still on, she writes.

Both are magnets for foreign investment, both have a healthy economy, dysfunctional planning controls, and infrastructure and transport problems. But the solutions are very different. The NSW government will fund a second harbour rail crossing. Victoria, having abandoned the East West road link at the cost of $1.1 billion, is now focused on removing road and rail level crossings which should have gone a long time ago. What will living next to overhead rail do for the residents of the world’s most liveable city? Shades of Chicago? NSW has completed a review of planning regulations – the latest of how many? What’s the next step? The Victorian Planning Minister has stopped reviewing and started making decisions to allow large CBD Developments with foreign funding proceed.

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Commercial Property Commercial Market

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