How Hot is the Market?

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Every now and then, I’ll have a client call to check just how the market is traveling relative to the 1980s. And there is no question that it’s strong — but you do need to place it into context.

In the last eBulletin, I tried to give you an overview of where things stood. Recently, the ANZ Bank’s research team put out a report — and an extract from that reads …

“It is worth highlighting that the recent improvement in capital values follows a period of significant under performance, particularly in office and industrial markets.

Capital values for office and industrial property have never fully recovered from the late 1980s/early 1990s ‘boom/bust’. Even after their recent spurt, real average office prices are 37% below 1984 levels, while average industrial prices are 29% lower.

In contrast, over the same period real retail property values are up 33% while real house prices have jumped by a massive 128%. In light of these figures it is initially difficult to understand the recent concerns regarding excess price growth in these sectors.

However, unlike the residential market, commercial property values are almost wholly dependent upon rents and the fact is that both office and industrial rent growth have been remarkably subdued. Since 1985 real office rents have fallen by 41% and real industrial rents are down 37%.” … 30 May 2007

As you read in the eBulletin, our view is that Brisbane and Perth are actually following the traditional boom/bust line. While the other capital cities (each for differing reasons) appear to be following the scenario in the ANZ’s commentary.

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