Fast Track or A Fast Pass?

I wouldn’t want to be a politician for quids. Regardless of some slip ups – politicians have done a rather amazing job dealing with the prevailing circumstances. But as is the case in politics the lift in popularity is ephemeral. They are about to be under more scrutiny than at any time I can recall as we work our way out of lock down and get on with the job of rebuilding the economy.

This poses some real challenges for the real estate sector. The casual observer may be confused to see the list of projects that have recently been identified as “fast tracked” approvals. There are billions of dollars worth of private sector projects that have been stuck in the planning pipeline for years in New South Wales. Yet the vast bulk of the projects with the first “fast pass” are government projects. Then there are reports that the Sydney Fish Markets (another government project) are now in contention for approval. This is despite the fact the Star (a private project) also in Pyrmont is struggling to achieve any indication that it will get a green light.   In the economic downturn of the late 80’s and early 90’s there was an adversarial relationship between Landcom and the development sector because developers believed that Government was using the “shield of the crown” to compete with market-based developers. It took a decade to repair the rift. History could repeat (not with Landcom) but with the broader issues of Government giving itself a fast pass this time around.

Bad news sells well. Just look at all the bearish property forecasters getting column inches at the moment. But people on the ground dealing with the market will tell a different story. Builders are still taking orders for new homes, some I have spoken to over recent weeks were selling virtually the same numbers are they were a year ago. Robert Gottliebsen reported that buyers were returning. While there was an early  short-term issue with commercial lending (from non-bank lenders) there are signs that investors in these loans are coming back. The Government has injected considerable funds to maintain liquidity in the securitised residential loan market. Valuers are keeping their cool.  Institutional developers are recapitalising their balance sheets. There are no doubt issues in the hotel and retail sectors but this is yet to flow onto the residential development sector. (This is not a forecast because property performance sometimes lags economic shocks – but things aren’t doom and gloom for the residential sector just yet).

We should focus on the good news and not the bad news . The reason is that bad news creates dependency, rent seeking and handouts. This will provide temporal relief to the industry but foment long-term problems. As many economists will say, expectations are the key to economic resurgence. Real estate can be part of the recovery, and in residential property it doesn’t require the financial support that will beset other industries like tourism, retail and education. What we need is a new compact for Government and industry to work together not compete in these challenging times.