Are Things as Bad as Last Time?

People keep asking whether we are going to see the current market collapse — just like it did in 1989.

If you have been following my eBulletins and blog over the past 5 years, you already know that we are approaching the end of the current cycle. But this time, the fundamentals are not quite the same.

Australian Financial Review (1 May ’08) covered the ANZ Australian Commercial Property Outlook.

It seemed to echo my view that the present softening in yields will be short lived; and will be … “largely countered by rental growth, supported by good affordability, and a measured level of supply”.

However, you need to appreciate that this ANZ chart covers the whole of Australia. And in doing so, it tends to mask the extreme conditions presently operating in Brisbane and Perth — particularly, as far as Construction levels and Office vacancy rates are concerned.

In other words, for the first time at the point in the Commercial cycle … you effectively have a 2-tiered market — between the resource-rich States, and the rest of Australia.

Therefore, you would be wise to confine your investment focus to Melbourne, Sydney and Adelaide for the next few years.