2009: A New World

By Greville Pabst
CEO and Director

Welcome to our new look WBP News! We trust that you will enjoy our new format and expanded national property commentary.

I hope everyone has had a joyous Christmas with family and a happy New Year. Most of us were glad to have said goodbye to a turbulent 2008 and welcome a year of new possibilities, but what will 2009 bring? As I return from holidays I have been bombarded with negative news of rising unemployment, heightened economic uncertainty and increasing incidence of business collapse. The good thing about being on holiday is that I did not read the newspaper! Refreshed, it is now time to tackle the New Year.

Clearly, 2009 is going to be a very challenging year. We now live in a new world in the wake of a downturn, the magnitude of which many have never experienced. In order to survive we must mobilise and adapt, re-engineer and change our approach to business.

The current market is unforgiving and indiscriminate and has made an example of those investors in the wrong place at the wrong time. As Warren Buffett says “when the tide goes out, we find out who has been swimming naked”. Those who believe we will return to double digit property growth in the short term are misguided. At this time we need not look to the advice of our parents but rather to the advice of our grandparents who have lived through similar market distress. They would advise you not to spend what you don’t have, to put something away for a rainy day and don’t buy on the never never. Does this sound familiar?

If only we were all blessed with the benefit of hindsight. At WBP, we have not been unscathed, however, recognising the early warning signs we acted to adjust our business model and effectively avoided the full brunt of the ensuing storm. Unfortunately we have sustained loss through reduction in staff numbers, but we have continued to expand the business through mergers, acquisitions and diversification. Last year WBP acquired established commercial property management company Retail Realty, which operates under the WBP Corporate banner. Retail
Realty under the stewardship of Susan Gray and Antony Belcher is an exciting new opportunity for WBP. Retail Realty is a boutique commercial property asset manager with approximately $300 million of assets under management. It provides diversification to our business model and complements our valuation and advisory business.

I am also pleased to announce that Perth based valuations firm, Suburban Valuations has recently merged with and re-branded to WBP Property Group (WA). The new branch office commenced 1st February 2009 and remains locally operated by directors Brendan Aylmore and David Shorter. Complemented by a team of qualified property professionals WBP Property Group (WA) provides the same high level of service to which our clients have become accustomed.

Nationally, the property outlook for 2009 is not all doom and gloom. The fundamentals still remain relatively strong; interest rates are at the lowest level in many years and first home buyer grants are providing stimulus at the lower end of the market under $450k. In contrast to the United States, Australia has a shortage of housing stock and we don’t have the toxic high levels of non performing loans that have crippled America and some European markets.

The market place will correct in time, however, this change will not occur overnight. We are unlikely to see the end of current financial woes until the end of 2009 or perhaps even the first quarter of 2010. However, once pressure is relieved the market will revive quite quickly.

Property is not a year to year proposition. We quickly forget that in many capital cities property prices have in some cases doubled in the last five years. In Melbourne, in 2007 we saw a 30-40% increase in values in many inner and middle tier suburbs with similar gains in other states. In this context, a fall of 5-10% in the short term represents market stabilisation rather than property crisis.

For astute buyers, the current economic malaise will offer opportunities that have not been seen for years. The question remains, how brave are you?

Click to download WBP News Issue 24 - Spring Edition 2008