Olly Newland’s Column, 17 May 2009
Against the backdrop of a deepening global recession no-one can say how long it will be before ‘normality’ returns to the market. We are told this is shaping up to be the deepest recession since the 1930s Great Depression. If that is the case, we are also told (and I agree with this) we should expect flow-on effects to the world economy — possibly for a generation or more.
But let’s leave the high-level prognostications to the economists. In our own backyard, property investors and home owners alike must ask the question: Will the property market as we know it survive, or must it too undergo a fundamental shift?
From where I sit, the next ten years will likely see a far tougher financial and credit environment. The reworking of the laissez-faire capitalist system which brought us to this point cannot be avoided. The refrain “let the free market decide” has lost its potency and appeal — at least for now. The massive and unprecedented bailouts by world governments and the collapse (or forced mergers) of household names and companies both demand and drive eye watering changes.
As well as a re-ordering of credit rules, I predict there’ll be a major shift in how we assess a potential property investment, particularly commercial property. Over the coming decade (and perhaps beyond) I foresee a permanent change in the investment environment and in different classes of property investment as we all respond to the emergence of the new, tougher financial order. Some types of real estate investment that were considered “hot” yesterday will become the disfavoured white elephants of tomorrow.
‘Shaky foundations’ (Shorter version as Herald on Sunday column with Q&A)
NZ_Herald Sunday 17 May 2009