We have seen an interesting dynamic at the start of 2019 which has seen quality developers responding well to changes in the market. We have seen and been involved in:
– repurposing permits to hotels and serviced apartments,
– a rise in office developments given such tight vacancy rates and low unemployment,
– mixing uses to create retail underpinned communities as a response to structural changes in retailing,
– a very tight industrial market, and,
– solid sales in high quality owner occupier residential developments.
We believe the CRS which mandates that since September 2018 the ATO shares individual’s tax information with the Chinese government and the Royal Commission into Banking has created a government manufactured credit crunch that has cooled the residential investment market.
This is happening whilst the fundamentals of the residential investment market remain sound. Let’s not forget that this is a top to bottom single digit correction after prices in Sydney and Melbourne have grown 60% and 48% respectively over the last five years.* This correction shouldn’t come as a surprise and is very healthy for market equilibrium.
Historically credit crunches affect markets sharply and also act to reset the market for the next upswing. Once we see the resolution to the Royal Commission into Banking and a result in the federal election to give clarity on negative gearing, we believe this will stimulate further confidence in the residential market and create the next upswing. Very high levels of infrastructure spend also supports future economic growth.
Due to the above market influences, we are advising clients to buy sites this year and position themselves to capitalise on the forthcoming upswing whilst good buying can still be found.”
* Source: ABS