Winners and losers in divergent property market

Winners and losers in divergent property marketAll the economic indicators suggest Australia’s two-speed economy is accelerating, with the Sydney and Melbourne property markets going gangbusters while other capital cities lag behind, says The Australian’s property editor, Turi Condon.Condon, who will moderate a panel session of property leaders including Lendlease’s Steve McCann and GPT Group’s Carmel Hourigan at The Property Congress in October, says the big question is how long values in Sydney and Melbourne will continue to escalate.Pointing to CIC’s $2.45 billion acquisition of the Investa property portfolio last week, Condon says the industry must ask itself: “What is the ‘black swan’ event – that event out of the ordinary – that will change the market?”It could be a political decision in China or it could be something in the Australian economy, Condon muses – but there’s no doubt that values can’t stay on their upward trajectory forever.Condon says all current economic indicators point to a two-speed economy.”The divergence of our state economies is becoming extreme,” Condon says, referencing the ANZ/Property Council’s latest confidence survey and Office Market Vacancy report, as well as CoreLogic RP Data most recent figures, which find Sydney and Melbourne (residential markets) are steaming ahead of the other capital cities.CoreLogic RP Data’s latest statistics, released on Monday, find that dwelling prices across all major cities surged by 2.8 per cent in July. However, headline growth masks wide divisions between cities. Sydney prices increased by 3.3 per cent in the month, and Melbourne by 4.9 per cent. In comparison, Adelaide fell by 1.1 per cent, while Perth was up just 0.1 per cent.Similarly, the Property Council of Australia’s January 2015 Office Market Report found strong demand in Sydney and Melbourne, with office vacancies in Perth, Canberra, Brisbane and Adelaide remaining in double digits. The July 2015 Office Market Vacancy Report will be released tomorrow.Condon says the rising number of secondary stock vacancies is changing the way owners think about their assets.The 238,000 sqm of office space at Barangaroo South’s International Towers is already 90 per cent pre-leased to large corporates, freeing up large amounts of space in other parts of the CBD. “Landlords are starting to value small tenants for the first time, because they are looking for diversity in their tenant mix. While they once relegated small tenants to chase the Westpacs and KPMGs, now you see them more amenable to having a variety of tenants – including smaller accountancy firms, tech start-ups and manufacturers.”While this diversity minimises risk, it is far more difficult to manage a wider number of tenants, which is why high-tech support systems are proving essential.”We’re also seeing building owners develop space-for-hire spaces as they look for a diversity of income streams in response to economic conditions. It’s about not having all your eggs in one basket,” she says.Don’t miss your chance to learn more about the ‘View from the Top’, when The Property Congress presents Steve McCann, Carmel Hourigan, Charter Hall’s managing Director David Harrison, AMP Capital’s managing director Louise Mason and DEXUS CEO Darren Steinberg. Register for Congress today www.thepropertycongress.com.au.