Where has the year gone?
Another eventful year is hurtling to a close. What will 2018 bring?
Is a nuclear war to the North one tweet or one tantrum away, or is it just posturing for the folks back home who are losing faith in their leader?
Will Brexit finally happen, has Isis really been defeated, will the never ending territorial and political conflict in the Middle East be resolved with a relocation of a US embassy? How many more lone wolf terrorist attacks are expected during the festive season? Can they be prevented?
Let’s focus on the positive
Parliament has risen, but the political fall out continues. Will fringe parties dominate the debate and economic decisions in 2018? Is Australia irreversibly split along ethnic, cultural and social lines? Are we members of new political tribes?
Business conditions are strong and growing stronger, but consumer confidence is not keeping up. The future is not to be trusted.
The share market keeps rising. A Santa rally or a correction in the new year?
There is now a Royal Commission into the banks, their culture, reward structures and lending practices. Will it also look at the “Bank of Mum and Dad”, an emerging source of property finance for spoilt brats, or a lifeline for the struggle up the property ladder?
Non-bank lending entities are flourishing. Property finance has emerged as a new career option for former Prime Ministers, building directorship portfolios in a post political life. They come with lists of useful contacts and a pipeline to pools of funds.
The residential property bubble
Is it deflating in the “Superstar Cities” (RBA) of Sydney and Melbourne? Bad news for investors, but good news for first home buyers until the prices catch up with the government grants. Will they take the risk? With median house prices in middle ring suburbs reaching $1 million, paying off the mortgage presents a lifetime struggle and fear of interest rate fluctuations.
The Sirius building, a superb example of the brutalist architecture of the mid 20th Century on Sydney’s Rocks and well past its use by date as welfare housing is on the market after long delays.
History is up for sale – to free up much needed capital to provide low income housing elsewhere and a boon to property developers to capture land with glorious views and mega dollar profit potential.
Architects are lamenting, the selling agents are smiling and developers are salivating.
We’re up for grabs!
Our superstar cities and trophy buildings are still a great attraction for global funds. Competition for premium property is hot, the local REITs are battling to keep up. Generational change in the industry is freeing up tightly held assets.
In the latest global property deal our largest shopping centre landlord has accepted a takeover offer from a large European property owner to create a “global property giant” with 104 shopping malls in 27 retail markets around the world.
The property cycles
Property moves through predictable cycles. Development has moved into the construction phase and 2017 has been a year of staff shortages, head hunter strikes and salary rises.
Preliminary findings from research among property industry employers for the annual Avdiev Report shows that the Building and Construction sector has grown rapidly in staff numbers, especially on the contracts and project management side of the business. Young technical discipline graduates are getting jobs, unlike many other products of tertiary education which focuses on social issues, not hard core skills.
The flammable building cladding issue is finally being dealt with. In a gesture of goodwill and good PR, a Melbourne building company has decided to pay for the re-cladding of one of its residential towers. Government projects, often hospitals and other institutional buildings are also facing action.
The Retirement Living and Aged Care sector is expanding to keep up with our ageing population. By request from subscribers new Retirement Village Management positions have been added to cover the growth of responsibilities and staff numbers in the sector.
Retail property has a history of growth and change. Centres are being redeveloped and expanded, many have now reached a GLA of 100,000 m2.
The “Big Bad Retailer from Over There” has arrived. What effect will it have on the locals? They are fighting back, forming new alliances with start up delivery companies to keep their customers loyal and happy.
Gender diversity is good for business
2015 research (MSCI) has found that female leadership as well as general executive diversity in listed companies improves the bottom line. Women are making progress in other fields too, the
Australian Rugby Union has just appointed its first woman CEO.
But how do you keep them once you’ve got them? A Brisbane firm of architects with senior professionals of child bearing age has just built its own child care centre. Problem solved, continuity assured.
The future of work
The boom jobs v the doom jobs. In an increasingly automated future cognitive and high level technical skills, identified in RBA research in 2016, will be the winners at the top of the income scale.
At the low end there are the outsourced caring job – aged and child care workers and cleaners as well as Baristas and sales assistants.
The doom jobs are manual and middle management jobs, being replaced by robot workers.
Education and the kids
Recent NAPLAN results indicate that Australian secondary education standards, literacy and numeracy skills and civics knowledge are falling. What is the history of this slide and can it be fixed at tertiary level to give the graduates employable skills?
In defence of the kids – what chance have they got if they’ve been indulged all their lives, never been allowed to fail at school, taught by teachers graduated with low academic scores, given participation awards and encouraged into socially worthy tertiary studies.
Then they hit the business world, intense competition, economic survival and demanding employment conditions.
Reality bites – and it sucks for some. At least the kids joining the property industry come with some technical understanding, then it’s up to us to knock them into shape. They are adaptable, have great IT skills, but must learn to communicate and align with the culture and values of the company. When they do, they are a team to be proud of.
Santa Baby … …
Hang in there! No point in asking you for anything this year, you’ve got your hands full! Oh, those reindeer … …
Dasher’s done his dash, the rest are dual citizens and in no mood to provide benevolent transport services. It’s you who needs comfort and joy this Christmas.
Greetings to all
The Avdiev team wishes you a Merry Christmas, Happy Holidays, Seasons Greetings and a productive, innovative and successful New Year.
We look forward to sharing your success in 2018.
Welcome to Spring and the threat of nuclear warfare to the North.
Could the “politics of moral panic” – the statues, the burqa and marital laws be replaced by the politics of reality in the media headlines?
One social issue has been dealt with swiftly by the High Court, ruling that the postal vote on one of the dominant issues can go ahead. Dual citizenship is next. Could Canberra now focus on the energy crisis, an improving economy, small business – the employers of over 40% of Australia’s work force and how to help them keeping the people productively employed?
The RBA has left interest rates on hold at 1.5% for the 13th time in a row, but sees improvement in the economy, as well as changes in its structure, unforeseen shocks and the influence of global policies on the Australian environment.
Will he, or won’t he? The North Korean dictator versus the tweeting US President: who will blink first?
Could the Russian President be right in his assessment that North Korea’s moves are designed to remove the sanctions so he can feed his people?
Meanwhile, the latest intercontinental ballistic missile is being made ready … …
Any current European or Middle Eastern crisis pales into insignificance in comparison.
Across the ditch
The Kiwis are in early election mode. The opposition is ahead in the polls, with a bright and shiny new leader as the media darling.
Has a stable government which delivered a healthy surplus and left NZ “relaxed and comfortable” and therefore bored and ready to try a new government again? We Aussies did in 2007, and look at us now!
Back at the Ranch
In a country where everyone except the Aboriginals has foreign ancestry, the High Court is taking its time to decide the dual nationality issues of our parliamentarians. Media joy – more manoeuvres, more posturing, more headlines.
The lowly paid worker in the broader Australian economy may get some welcome relief if the upturn in business conditions and employment translates into wage rises.
There is good news
As the RBA keeps record rates on hold it reports that the effect of the mining slump is coming to an end and foreshadows more benign conditions ahead, despite warnings of economic shocks between 2017 and 2021. Capital expenditure in private industry is rising, wages will follow.
In property, the feel good factor is palpable. Record turnouts of people to property related industry functions indicates the depth and longevity of positive conditions on our patch. There’s lots of action in every market sector.
The Asset Classes
Battles for supremacy, director spills and hostile takeover attempts dominate the listed property sector.
Foreign capital is still chasing our assets, the threat of a nuclear war is not yet a deterrent in the long term plans of the global sovereign funds.
There’s lots of media about a new asset class – “Build-to-Rent”. Heeding the old saying “the second mouse gets the cheese”, when will the discussions end and who will be the first to take the plunge?
The banks’ latest moves in residential lending are keeping mortgage activity at a modest level. Will this help to improve their market reputation?
They are aiding the RBA’s attempts to keep the bubble at bay. Is there still a bubble?
Prices and activity in residential real estate seem to be stable, will they ease?
Show me the Money
Staff shortages continue. The head hunter frenzy, especially in the design and construction markets has speeded up in the last few months.
Outrageous offers to change jobs are out there and are driving up the remuneration of existing staff. Employers are reluctant to lose good people and strive to match the offers.
Avdiev has been engaged on a number of consulting assignments to benchmark executives under threat in a very fast moving market.
It will be interesting to see if the modest pay rise predictions in the March 2017 Avdiev Property Industry Remuneration Report will hold or what effect the market frenzy has had on recent pay reviews.
The Avdiev Survey is underway, and if you have not yet contributed data, please do so before Monday 11 September. Click to contribute.
There are many other pay issues in our industry.
It’s not only the major players who are facing pay disputes which we have been asked to resolve. The politics of envy are alive and well among the minnows.
As companies grow and prosper disputes arise when remuneration needs to move to reflect the hard work and success of the chief. Issues such as sibling rivalries, many voices with differing points of view, attacks on the CEO’s level of reward, succession planning, retention, promotion and pay disparities emerge.
As independent property remuneration consultants with a wealth of salary and incentive data gathered from employers in all market sectors, we find totally impartial solutions acceptable to all parties – until the next family tiff or the next pay review.
At the top
Reports have emerged about the trend for reduction in pay for CEOs in major global companies. Outcries about the level of reward paid to recently departed CEOs of Australian top companies has increased resentment about the disparity in pay between the fat cats and the underlings.
There’s renewed debate about incentives, bonuses, retention payments and the criteria for such perks. Have incentives become an as-of-right expectation for meeting targets or should they be reserved for targets exceeded?
As the AGM season for ASX listed companies heats up and proxy advisors encourage major investors to vote against director and executive remuneration, ASIC the regulator, concerned about market destabilisation, has warned the proxy firms to curb their enthusiasm for negative advice.
Last but not least – The Women
Gender and pay differentials are still hot button issues. Among other entities Male Champions of Change, including those in property, are making valiant efforts to bridge the gap. But so far there is no clear evidence that feel good platitudes are showing quantifiable results that can be touted as a measure of real success.