Commercial Property Poised to Take Off in 2012

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ALL YOU need is a sprinkling of confidence … with an understanding that things are not as bad as you read in many newspapers.

For some time now, I have been trying to explain how the underlying fundamentals for Australia’s economy and Commercial property are strong.

And a recent AFR headline Recruitment boom bucks the trend (9 Dec 2011, page 41) now confirms that our major law firms are “in the midst of a hiring spree”.

Purely a Matter of ConfidenceHowever, if you still need some more convincing of Australia’s well-being, just take a look at these two graphs.

Clearly, two positive aspects emerge:

  1. Our economy is outperforming other major countries; and
  2. Australia has actually surged ahead since the global financial crisis in 2008 — whereas other countries have barely clawed back to where they were.

Despite retailer complaints regularly making headlines, overall household spending forms a major part of that growth. In fact, consumer spending grew by 1.2% in the quarter (and 3.8% over the year) to September.

Furthermore, incomes are growing, along with a record terms of trade. Plus, corporate profits surged 5.7% for the quarter — climbing to 10.7% for the year.

Moreover, business investment is up 12.9% for the quarter — representing a 22.7% increase for the 12 months to September.

Unfortunately, you can’t cajole (nor control) a country’s level of confidence — because it is a very fragile commodity.

However, the Westpac-Melbourne Institute Consumer Sentiment Index and the NAB monthly business survey are both showing a general improvement in confidence.

Bottom Line: It should only take a little ‘think time’ over our extended summer break, for the penny to drop. And when it does, people will quickly begin to raid that pile of savings they’ve been squirreling away.

Hopefully, the latest interest rate reduction will provide the encouragement needed for serious investors to realise … that now is the time to step back into the Commercial property market.

And just make sure you do so, before this rare opportunity dawns upon everyone else.

 

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