Unlike the US and Europe, Australia has not suffered a banking crisis. Therefore, our banking system is still capable of providing credit for normal growth.
With the US unemployment rate approaching 10%, this will delay any quick turnaround for the Commercial property sector.
Decoupling from the US
As you would expect, there is a strong correlation between high unemployment, tenancy contractions and falling commercial property prices. And as a result, a reluctance by banks to provide credit.
But this is not the case in Australia — where across the country, Office leasing enquiries are currently only about 8% below where they were, before the financial crisis hit.
In fact, Melbourne’s CBD is the one market where demand actually exceeded supply, when compared with September last year.
But the important thing to realise is that (apart from the share market perhaps) … Australia has now decoupled from the US economy. And looking back, this probably occurred during 2000-01.
Currently, China is taking around 80% of our iron ore exports, and over 20% of our coal exports. And this has more than compensated for the decline in exports to Japan and Korea.
Even so, it you ought not underestimate the boost consumer spending from Australia’s solid population growth — mainly from immigration.
Apart from an increased intake from the UK, many ex-pats are returning home — because things are now looking pretty good down under. Most of this influx is in the form of highly-skilled, in-demand workers.
Over the past six months, companies have been meeting consumer demand through a run-down in their inventories. With the confidence of an upbeat economy … they will now embark upon fresh production once again.
And that means, more people being employed and a dusting off their expansion plans. All of which is good news for the Commercial property sector, from 2010 onwards.
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