Written by PBIE
5 November, 2019
Expo Insights – Part 1
The good news is that it does not look likely that the current property upswing will be derailed according to Mark Thomas – Exhibition Director, Property Buyer & Investors Expo. The five potential headwinds are:
1) Australia enters a recession;
2) banks do not loosen their lending criteria;
3) there is a significant increase in supply of properties in the marketplace;
4) the government does not support economic growth with continued spending on infrastructure and health; and lastly
5) interest rates go up.
To points 2 & 5, Geoff Wilson from Wilson Asset Management paraphrases a conversation he had with RBA Governor Philip Lowe when answering the question “should we be buying the banks?”. He commented that Philip Lowe did not see credit growth being strong, in fact it looked like it would be weak, and as such, Wilson did not like the banks in his funds. He also suggests that interest rates would “stay low for sometime”.
Government spending was expected to remain upbeat with infrastructure spend per state along the eastern seaboard strong (NSW $54.1b, VIC $29.5b, QLD $15.5b) according to Dyldam’s Andrew Shehadeh. The focus of this session was mainly around the Western Sydney Aerotropolis with 11,000 new jobs expected to be created during construction and 28,000 direct and indirect jobs created once the airport was operational.
The new Western Sydney Airport would cater to 10 million passengers per annum (up to 2,000 per hour) within five years and freight capacity would be up to 220,000 tonnes.
In addition to the building of the airport, the infrastructure spend on metro, light rail and highways would also support economic growth in NSW. Specifically, Sydney Metro West, Metro Link Western Sydney Airport – Schofields, Parramatta Light Rail, Outer Sydney Orbital (M9), Western Sydney Highway Link (M12).
This translates to $1 billion on roads and $3.6 billion in additional infrastructure across 10 years.
The supply of property listings and new buildings in the market place were expected to continue to rise according to Mr Shehadeh. Listing volumes are up some 30% from the May election with many older listings clearing from the market. Longer term, the strong growth in Australia’s population suggested a shortfall of around 40,000 dwellings per annum. Australia’s population growth is being driven by strong immigration with approximately 250,000 people per annum immigrating, twice the rate of growth of the OECD average.
Australia is behaving like an emerging economy and is in its 110th consecutive quarter of growth, sharing in the company of China, India and Vietnam. This growth in population suggests that a city the size of Brisbane will be needed to be created every five years to keep property supply and demand balanced.
Ironically, it is the highly indebted nature of Australia’s households that should ensure we see positive economic growth this year and a continuation of the property market revival following three drops in interest rates.
Australia has a number of new growth industries emerging in FinTech, MedTech, AgTech and EdTech which are also supporting economic growth.
“As an exporting nation we produce many things the world needs.” Thomas says.
Australia is the number one producer of a number of goods. We all know about coal, iron ore and gold, but we are also the number two in world production of Lithium, Cobalt and Copper which are used for electric car batteries – a large industry of the future.