The Impact Of Global Financial Crisis On Australian Real Estate Market

The Impact of Global Financial Crisis on Australian Real Estate Market

Discuss About The Occupational Class Differences In Suicide.

The global financial crisis had a major impact on international property markets.  This report with evaluate the post GFC climate in present-day terms.  It will also evaluate the future strategies of commercial marketing in the coming years. The impact of GFC crisis made the situation of option developing countries like Australia vulnerable (Bech, Gambacorta and Kharroubi 2014). Property market is dependent on retail funds which late to further decline of property market.  This also late to the decline of equity market in Australia post GFC period.  Every firms and companies suffered huge losses during this period.  Due to this housing bubble, Sydney and Melbourne suffered the most.

The global financial crisis which began in 2007 on property market had a wide impact on Australian markets.   With huge number of borrowers not paying off their loans, commercial banks were facing difficult situation in liquidity.  Despite the strong housing sector, GDP of Australia in 2008 decline considerably.  Investors were reluctant or completely unable to acquire and progress the real estate industry without the aid of debt.  However in current situation most of the companies are active in restructuring projects rather than in acquisitions.  It can be also informed that if the real estate market where more robust the companies could have helped their clients to buy sell and develop real estate (Xu et al. 2011).

The Government of Australia took some positive steps by keeping the rate of interest of house loans at a lower level in order to with the crisis situation.  The government also intervene to recover the real estate market from this financial crisis.  Presently the situation is way better than it was 5 to 6 years back (Mishkin 2011).

The long term transformations tend to affect the all over stages of demand and supply for several kinds of real estate within various locations however these transformations also have a major qualitative influence on the existing market. International trains can be influential on the real estate sector in two different ways. Firstly it can affect the impressive values of any location and it can also affect the implicit values of any building. In either way the appeal to the customers can be changed which may have a direct influence on the value and the income stream (Rey 2015). However there is a major difference between both of these impacts which refers to the ability of the owners in reacting to the situation. The quality of any building can be balanced to match these new changes to some extent however it should be noted that changing a location is generally impossible. Therefore the international Trends which affect the quality trend of the location have severe consequences on the owner for investing long term then it affects the building characteristics (Milner, Niven and LaMontagne 2015).

Globalization and its Influence on the Real Estate Sector

 It can be said that due to the structural changes in the economy the commercial property managers are highly influence therefore this paper will discuss the current and future implications for the commercial property managers because of the structural changes within the economy of Australia (Harvie and Van Hoa 2016)

The influence of globalisation on the real estate sector can be seen from two different methods while the first one is the Global market convergence and the second one is the developing significance of the international hubs. The past analysis points out that the latter trend has been dominating the real estate sector over the past decade as a comparatively less cities are considered as the Global cities along with particular transnational activities. This is entirely reflected within the particular structure of retail and office markets. The focus of the higher value business services and the activities of the retail sector as the international display Windows have laid the rent going higher significantly in different locations (Xu et al. 2011). In terms of the Logistic properties the international transportation abstained to fulfil same kind of activities as the international cities for retail or office properties. As these are significant segments of the international delivery networks and these are driven more by the domestic economic factors than the Global ones. However it should be noted that even if it is closely related to the international economy it is not necessarily meant that the value of the higher income will grow in long term. It seems that the primary advantage of investing in the international cities is the wild demand base and less risk of structural or long term vacancy (Davis and Zhu 2011).

The effects of globalisation on the market of real estate can sure be looked at from two angles; one is growing importance of the Global Herbs and the second one is convergence of global markets. It has been seen that emerging importance of global hubs have been dominating over the last 20 years where only a small number of cities played the role of global cities with some specified transnational functions. It can be seen in the specific retail Markets and the structure of the offices. It can be said that the concentration of function of Real units as Global display Windows and high value business services has led to major rise in the rent levels in other locations. It is seen that for the logistics properties the Global transportation hubs satisfy a similar function to that of the Global cities for retail properties or office properties. It is a matter of fact that these are the vital parts of the network of Global Delivery and it can be driven more strongly by global then the factors of regional economy (Benetrix, Lane and Shambaugh 2015).

Implications of Structural Changes in the Economy for Commercial Property Managers

 The factor of being associated with the global economy does not actually employee value growth or higher income in the long term. It may appear that the major advantages of investment in global cities can be looked at as broad base of demand and it can lower the risk of structural vacancy in the long term (Reinhart and Rogoff 2014).

It has been seen that properties in various distance parts of the world somehow show some likewise patterns in the rents and the annual returns can be somewhat puzzling. It can be said that real estate is not at all possible and it  predominantly satisfies the demands of the local businesses does in some markets it could over heat when the others in a session for a long time. This can take place because neither supply nor demand can be located easily. The core movements should be attributable to the Global factors that an underlying and it has been identified that the global GDP is the connecting factor in this case (Rey 2015). This work shows that the increase in the international economic links resulted from a flow of services goods and money can lead to a sizable degree of alignment in the behaviour of the market of international real estate (Benetrix, Lane and Shambaugh 2015). It has been observed that a presence of long run relationship among the office markets returns in three major financial centres which are Tokyo New York and London which is the likewise conclusion for the general real estate market which shows that International markets are integrated in the long term in spite of seemingly low short term return correlations. It is a matter of fact that the integration of international markets is prone to be hired for the publicly listed organisations then the investments in private real estate market because of the generally lower entry barriers for foreign investors (Herndon, Ash and Pollin 2014).

It can be said that that future of commercial property sector in Australia is sustainable. Several initiatives and strategies have been implemented in order to do so. Australian interest rates of 90 bank bill is expected to decline in the coming years. It can be further depicted with the assist of the following graph:-

However, it can be said that the banking industry may raise the costs of borrowing by restricting themselves from risky initiatives in the overall sector. It can be also inferred that the price growth has been uneven across the various cities of Australia, where, Sydney and Melbourne are topping the charts.

Future of the Commercial Property Sector in Australia

From the above graph, it can be seen that Sydney and Melbourne have top the charts in terms of highest growth in house prices. Other cities could not matchup with them due to high rate of unemployment and higher number of risks of oversupply of real estate apartments.

On the contrary, it can be also inferred that the ratio between household debts to income is on the higher side. In fact, Australia has the second highest household debt to income ratio. This is not a good sign for the economy as the position of the debt prices is vulnerable. This could hamper the future growth in a negative manner (Milner, Niven and LaMontagne 2015).

However, it can be also inferred that the demand of residential markets is on the higher side and it is also expected to be highest by the end of 2020. The population growth in Australia is also expected to increase, therefore, the construction activity is also expected to increase as well (Bech, Gambacorta  and Kharroubi 2014). This can be further depicted with the help of the following figure:-

It can be also inferred that the many real estate companies have failed to adopt modern form of technology which further related in slower growth in this particular sector. It has been seen that there are many operational inefficiencies that resulted in augment productivity in the sector. There are many ineffectiveness and errors as well which increases the possibility of fraud and risks related to this industry. However, on the positive side, it has been seen that the industry has been taking several measures in order to minimize this systematic and unsystematic risks. They are trying to optimize their costs. The companies are also taking effective measures to improve their respective speed and accuracy in their operations. They are also taking proactive steps to streamline record management and enhancing compliance and monitoring the respective risks.  They are also implementing digital finance in their operations to minimize the risks and errors in their process of operations (Benetrix, Lane and Shambaugh 2015).

From the above graph, it can be seen that the employment status in the real estate industry and commercial housing property sector is increasing. This can be considered as a positive sign for the growth of this sector.  Therefore, the future of real estate industry can be considered as positive from this point of view (Zuo and Zhao 2014).

Operational Inefficiencies in the Industry and Efforts to Minimize Risks

Conclusions

It can be concluded that the Global financial crisis has had a negative impact over the real estate property sector due to changes in Australian economy. Though the government and the organizations took some positive steps to resolve the issues, still, certain recommendations can be given to them in order to overcome the crisis. Firstly, the organizations needs to consider a holistic approach in order to resolve these risks. They must try to enrich the experience of the employees to get maximum productivity from them. They needs to operate on customer-centric models. In addition to this, the organizations need to redefine leadership models in this sector. They are also need to focus on diversity by taking a progressive approach in this sector. In this way, the risks and uncertainty in the commercial property sector will be nullified.

References

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Benetrix, A.S., Lane, P.R. and Shambaugh, J.C., 2015. International currency exposures, valuation effects and the global financial crisis. Journal of International Economics, 96, pp.S98-S109.

Davis, E.P. and Zhu, H., 2011. Bank lending and commercial property cycles: some cross-country evidence. Journal of International Money and Finance, 30(1), pp.1-21.

Deloitte.com. (2018). [online] Available at: https://www2.deloitte.com/content/dam/Deloitte/au/Documents/Real%20Estate/deloitte-au-dre-real-estate-outlook-2018-australian-perspective-150218.pdf [Accessed 24 Apr. 2018].

Harvie, C. and Van Hoa, T., 2016. The causes and impact of the Asian financial crisis. Springer.

Herndon, T., Ash, M. and Pollin, R., 2014. Does high public debt consistently stifle economic growth? A critique of Reinhart and Rogoff. Cambridge journal of economics, 38(2), pp.257-279.

Milner, A.J., Niven, H. and LaMontagne, A.D., 2015. Occupational class differences in suicide: evidence of changes over time and during the global financial crisis in Australia. BMC psychiatry, 15(1), p.223.

Mishkin, F.S., 2011. Over the cliff: From the subprime to the global financial crisis. Journal of Economic Perspectives, 25(1), pp.49-70.

Reinhart, C.M. and Rogoff, K.S., 2014. Recovery from financial crises: Evidence from 100 episodes. American Economic Review, 104(5), pp.50-55.

Rey, H., 2015. Dilemma not trilemma: the global financial cycle and monetary policy independence (No. w21162). National Bureau of Economic Research.

Xu, Y., Jiang, A.L., Fargher, N. and Carson, E., 2011. Audit reports in Australia during the global financial crisis. Australian Accounting Review, 21(1), pp.22-31.

Zuo, J. and Zhao, Z.Y., 2014. Green building research–current status and future agenda: A review. Renewable and sustainable energy reviews, 30, pp.271-281.