10 Sep 2010

Australian real estate market with Gary Best

Gary Best, head of the Real Estate Markets group at Clayton Utz, discusses the key trends and opportunities in the Australian real estate market.

Gary Best on the Australian Real Estate Market
Gary Best, Partner, Real Estate

What are the key trends in the Australian real estate industry?

I think I'm seeing two trends. One is the trend against acceptance of risk - people are risk averse in this environment. The second is "where does the money come from? - particularly as the banks are still tight on credit. It's hard to get money to make a real estate deal work from the banks.

How has inbound investment changed the Australian real estate marketplace?

It's all about competition. New entrants mean more players and more competition, in particular - will the foreign entrants accept a risk position that the local people might not? Do they have more money and cheaper sources of money? Do they have a lower hurdle rate? - which means the local investors are in a difficult position in terms of competing with the foreign investors.

Where are the opportunities within Australian real estate?

I think the opportunities are for those who have an appetite for risk. If you can take on some risk then you are a bit different to other people in the market, so there's an opportunity for you. Also because money is tough and banks are not lending, if you've got sufficient capital to make a deal work without having to go to the banks, then you've got an advantage over others.

What are the greatest challenges for business in real estate?

I think a great challenge for businesses who play the real estate game is the question of how it affects their balance sheet. You either do a deal or you don't. It affects your revenue, your liabilities and your assets as well, so I think a challenge is: Do I do the deal or not? What effect does it have, good or bad, on my financial statements?

What are the greatest challenges for your government clients in real estate?

Government clients want a successful outcome and the private sector can only play ball if they're given a set of rules to play within, that they can deliver on. One of their greatest problems is the requirements of the banks before debt funds are made available, so the challenge for the public sector is to realise what those restrictions are and to go out and ask the private sector to play in a way that they can deliver, in terms of current requirements by the banking sector.

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