In case you missed it, here are the key take-aways* from the recent Property Council event: Navigating the Unknown (live streamed Friday 17/4/2020).
Economic Conditions – What to expect over the next few years
It will be Australia’s biggest economic fall ever, expect 1 million in job losses and likely 10% unemployment (similar to the 1990s recession). The closure of industries and tourism have had a huge part to play in the fall, but also a decrease in population with 400,000 temporary workers and visitors having left, causing a fall in housing demand. Under usual conditions we would have expected demand for 180,000 dwellings a year, now we only need 100,000 or 120,000 per year due to the fall in population. Per capita growth is expected to halve, although the government reform agenda may offset some of this by stimulating the economy. Interest rates will be effectively zero. Despite this there are some significant opportunities, as outlined below.
How did we adapt? (Stockland and Mirvac)
Stockland had a Pandemic response team that was active from the start of the crisis and instituted measures that did not have to go through the usually hierarchy, decisions were able to be made at the asset level and this meant that local teams could respond more quickly. This has meant they can now transition to the pandemic working group and recovery working group which will oversee operations under the ‘new norm’.
At Mirvac a risk simulation workshop has been run every year, so when the crisis hit, they had a plan in place. They were able to adjust the cadence and methods of work on construction sites to ensure the Health and Safety of all involved. They were able to switch their entire team to remote working over a weekend. A piece of valuable advice from Susan Lloyd-Hurwitz was to, (and I paraphrase here): Not to fill your brain with things you can’t control and focus on what you can control and being brave enough to make decisions on imperfect information.
What are the Opportunities?
From Susan Lloyd-Hurwitz’s perspective the crisis has changed peoples’ mindsets – in the past there are a lot of things that people thought were hard, but now upon recent reflection those things are actually easy and that is because we’ve had to make a lot of harder decisions in 2020 – “what was hard is now easy”. As an example, Mirvac was intending to transition to Microsoft Teams over a 6 month period and due to the crisis this was rolled out over a weekend. Her advice is that we would do well to keep this new mindset of agility and become urban asset creators; to build in what we can learn and know about how people use space and focus on making our cities better places to live.
Mark Steinert outlined some good opportunities in micro-manufacturing and that we need to take advantage of the low interest rates and transport. We have tremendous opportunity to use big data as well as physical barriers to solve the pandemic problem and that enhancing our logistics capabilities will allow us to grow.
From David Planks perspective we have had 26 years of ‘good times’ which has created stasis – we have all become too comfortable in the environment. This economic shock will provide the opportunity to make important government reforms, but these will need to be designed and implemented as a long-term reform agenda for Australia to get the maximum benefit.
Susan Lloyd-Hurwitz, CEO and Managing Director Mirvac
Mark Steinert, CEO and Managing Director Stockland
David Plank, Head of Australian Economics ANZ research
Session Chaired by:
Ken Morrison, Chief Executive Property Council of Australia
- Please note the above summary is entirely from my recollections, any omissions or errors lay entirely with me.