Peering into the capital markets crystal ball

The key phrase for 2017 is ‘disruptive opportunities’ says the Property Council’s executive director of international and capital markets Andrew Mihno. And that brings with it both risk and potential reward.

While the term ‘disruption’ tends to evoke technological innovation – and the property industry should be attentive for the next Uber or Airbnb – the political and economic disturbance that played out over 2016 will continue to influence opportunities in capital markets over the next 12 months.

“In times of uncertainty or upheaval we know two investments fare better than any other – gold and property,” Mihno says, adding that property is a “defensive stock” which has a “utilitarian worth outside of its own trading value”.

Anemic growth around the world, uncertainty surrounding Brexit, shifts in trade and foreign policy in the United States and political instability in Europe will continue to propel more investors towards Australia’s real estate market, with its consistently stable and high risk-adjusted returns.

“Australia is fielding a steady investor demand for property projects, but as stock prices rise, opportunities favour experienced investors who understand the market complexities that yield the best results,” he explains.

As the pound falls, Mihno says “Brexit is an opportunity for anyone in Asia looking to get a foothold in Europe.” At the same time, European multinationals and investors are now looking beyond Britain’s shores to Asia and Australia.

“Enquiries from Europe are increasing and uncertainty is creating opportunity as well as risk. At the same time, Asia, and particularly Australia, look safer by the day.”

The policies of president-elect Trump present the same balancing act of opportunities and risks. While Trump’s promises to stimulate domestic business may create some “green shoots”, any significant fluctuations in trade and foreign policy will dampen optimism abroad.

“2017 will need to be a year of supreme diplomacy for Australia, navigating its economic and trade ties with China and greater Asia, as well as the US,” Mihno adds.

Technological disruption will continue to improve building processes and materials, as the market looks to reduce costs, and boost the bottom line while fielding ever-greener stock.

Tightening capital adequacy rules will open up more opportunities for alternative lenders as banks take more conservative lending portfolios.

“The ever-present balancing act will require a strong focus on ensuring development supply is not adversely impacted in the process of diversifying debt sources.”

Mihno says that no one yet knows how these global disruptive forces will play out, but Australia is well placed to seize the advantage.