Australia’s economy and property sector face a long road to recovery after COVID-19, leaders in real-estate say.
In a webinar hosted last week by the Property Council of Australia, Darren Steinberg, CEO and Executive Director, Dexus; Kylie Rampa, Chief Executive Officer, Property Australia, Lendlease and Jonathan Callaghan, Chief Executive Officer, Investa, applauded the Federal Government’s handling of the coronavirus and said Australia was relatively well-positioned to recover from the crisis.
But they cautioned that both real-estate and the economy face a long-road to recovery.
Declaring that the next eighteen months would be difficult, Steinberg said the world was in a global slowdown which is unprecedented in scale.
As for Australia, he said challenges lie ahead in several areas.
Sectors such as education, he said, were being impacted by the loss of international students.
On real-estate specifically, migration levels – the key to the sector’s success over thirty years – are expected to grind to a halt.
“I think this wish of a helpful V shaped recovery is not going to happen,” Steinberg said.
“What we are doing is preparing for a grind out of this. On a panel a few months ago we were talking about a two-quarter recession. (Now,) from a Dexus perspective, we are aiming to be grinding out this by Christmas. Hopefully, we will start to see an improvement into 2021 but I don’t think we are going to see the real green shoots until about 2022.
“I think we are going to have quite a difficult eighteen month period ahead.”
She warned that the recovery will be a staged process and that the property sector needs to be prepared for a long journey ahead.
A sustained economic recovery, she said, was unlikely until consumers have sufficient confidence in their job security in order to continue to spend.
The above comments come as confidence in the economy and the property sector continues to decline – albeit with the likelihood that this may improve as new infections decline and restrictions are gradually lifted.
On the economy, consumer confidence suffered its largest fall in history to go from 91.9 in March to 75.6 in April, according to the Melbourne Institute and Westpac Bank Consumer Sentiment Index.
This is lower than at any other time since the recession of the 1990s.
Business confidence, meanwhile, plummeted from -4 in February to a record low of -66 in March, according to a NAB survey.
In property specifically, the Property Council of Australia/ANZ Property Industry Confidence Index plummeted by 61 points to go from 123 in the March quarter to 62 in the June quarter – the lowest level in the survey’s nine year history and well below the 100.0 mark which separates net optimism from net-pessimism.
This comes as the economic outlook remains grim.
In its forecast released in April 6, the International Monetary Fund said it expected the global economy to shrink by 3.0 percent this year before recovering next year as the economy normalises again.
In Australia, the IMF expects the economy to contract by 6.7 percent this year.
Despite their caution overall, aforementioned commentators praised policy maker-handing of the crisis.
Healthwise, the success of efforts to contain the virus is evident through the low rate of infections and fatalities, they said.
Economically, support measures in place along with accommodative fiscal and monetary policy will aid recovery once the crisis abates.
Nevertheless, the leaders stressed the need to keep the virus under control and warned against lifting restrictions too early.
“We need to get on top of the coronavirus issue properly – once,” Callaghan said.
“The worst thing we can do is loosen restrictions too early and face an environment where we have to close it back up again.”