Sydney, March 19, 2019 – The downturn in the Australian housing market should not be overstated according to CBRE’s global chief economist, Professor Richard Barkham.
Speaking at CBRE’s Annual Market Outlook event at the Sydney Convention Centre, Professor Barkham said a comparison of housing markets around the world highlighted that the current market conditions did not represent a serious correction.
“I would say also, if you look at prices per square foot, Australian housing prices are not out of line globally, so you should not overstate the downturn in the housing market,” Professor Barkham said.
“You are a little exposed on the construction side. Your share of construction as a percentage of GDP is relatively high, so the downturn in the housing market feeds through into construction. However, if you look at the Australian economy, you have plenty of monetary policy options, you can cut interest rates and the government balance sheet is extremely healthy. It seems to me that there are headwinds for the Australian economy and it does need to rethink its place in a de-globalising world but, nevertheless, the outlook is reasonably good.”
Professor Barkham also outlined a relatively robust outlook for the global economy in 2019.
“The US and China are driving growth and easing monetary policy, Europe is about to pick up with fiscal stimulus, trade and Brexit are having a limited effect,” Professor Barkham said.
However, he noted that one area of concern was the potential impact of too much fiscal stimulation for a global economy that was in “reasonably good shape”.
CBRE’s APAC/EMEA Head of Research Henry Chin and Australian Head of Research Bradley Speers also addressed last night’s event to take a more in-depth look at economic and real estate conditions in the APAC region.
Mr Speers noted that one of the major considerations for the Australian market was the upcoming Federal election, which could have a profound impact on the residential sector, given Labor’s commitment to abolishing negative gearing for existing homes.
“There’s a lot of conjecture on what this might do to the housing market, but I think two things are important,” Mr Speers said.
“One is that negative gearing will remain for new housing stock and two, Australia needs around 170,000 new dwellings per year, so the changes in negative gearing might just skew who is delivering and owning that stock, but we do need to deliver new housing supply.”
Addressing the current downturn in the overall housing market, Mr Speers added that a positive was the likelihood of a kickstart for Australia’s nascent build-to-rent sector, given the recent reduction in residential site prices.
In relation to the broader property market, CBRE’s Asia Pacific/EMEA Head of Research, Dr Chin noted that flexible working was having a considerable impact on office space demand in the APAC office sector. This was particularly apparent in Australia, with co-working accounting for 17% of net absorption across the country last year.
On the retail front, the importance of placemaking, innovation and the right tenant mix was another area of focus – particularly in Australia, with 22 major retailers having either moved into voluntary administration or left the market altogether in 2018.
“Looking ahead, there will be discount department stores closing in Australian shopping centres in the next few years so owners need to be thinking about that now and how to fill these sizeable footprints,” Mr Speers said.
“There are a number of ways, including bringing in overseas discount department stores or mini-majors or bringing in new experiences or services that can be provided in shopping centres.”