Ok, so not “really” a supertall, but in the context of Adelaide real estate, a huge event.
What intrigues me though is the timing. Specifically, when it is proposed to be finalized and opened.
And the possibility that this one tower may in fact mark the absolute peak of the Australian land markets!
This is now of national importance. I’d suggest it’s even further than that. Regardless of where you reside today reading this, what we shall cover today remains the single best way to identify the final land market peak in your country.
Do you own or invest in real estate? Or own your own house?
Do you believe it would be useful to know when the peak for those assets is due?
Then I suggest you read on.
Skyscraper index.
What I want to cover with you is one of the best ways of determining the absolute peak of a land market anywhere. One that has stood the test of time.
As the US land market passes the halfway mark of 13 years up, the timing of the final peak is rushing into view.
Today is the time to apply this tool. What tool do I speak of? The skyscraper index.
Modern economists would, if they are polite, call this an “unconventional” index. Frankly, as they don’t study land markets in general, their opinion on it is inconsequential. For those of us who do study land markets, its practical application makes far more sense.
Invented by Andrew Lawrence, a property analyst at Dresdner Kleinwort Wasserstein, the index was based on a relatively simple idea – that the completion of the world’s tallest building is inevitably a marker for the start of the next global economic crisis.
The Skyscraper Index is one of the most robust bubble indicators over long periods. The index specifically involves the world’s tallest skyscraper, whose construction progress matches up with many historical financial crises.
Burj Khalifa is currently the world’s tallest tower. Built at the cost of $1.5 billion, the 828-metre tower, with over 160 storeys, was officially opened on January 4, 2010. Mohamed Alabbar, Chairman, Emaar Properties, the developer, said: “Burj Khalifa is the Arab world’s tribute to the art and science of modern engineering and design. Burj Khalifa symbolises the aesthetic unison of many cultures – from Arabia and the rest of the world.”
Well, it turns out it is also famous for something else. When it opened, it marked the absolute bottom of the 3–4-year land price led recession which marked the culmination of the last fully completed 18.6-year Real Estate Cycle.
A great testament then to the usefulness of the skyscraper index.
Now, in comparison, the dimensions of Adelaide’s Festival Plazas skyscraper look tame.
This project will be the highest commercial tower in Adelaide, stretching up to 160 metres. It incorporates almost 50,000m2 of space across 38 levels, prominently featuring 30 levels of state-of-the-art office space.
Premier Peter Malinauskas spoke about the project’s importance, stating, “Our state’s economy is growing, and our city is growing up. This will be an iconic building that will define Adelaide’s skyline. We want and need more workers in our city, and this sends a clear message that SA is open for business and investment.”
“This development will be a lynchpin of a reinvigorated Festival Plaza and bring in more than a billion dollars in annual economic activity to the area.”
There’s the latent business case. Now, let’s decipher what this all “really” means!
Timing is everything.
Remember as always where we are in the current cycle. The original proposal for this was around 3 stories. By the time the application and development plans were formalized and approved, what did land prices in the Adelaide CBD do? They’ve skyrocketed, right?
No different to any other global CBD frankly.
And so, the only sure way for developers to maintain a healthy margin on their sales is to build higher. Thus, 38 floors today. Of course, this necessitates a larger loan to build it. Resulting in more credit creation, another hallmark of where we are.
But for mine, the real reason why this needs to be followed is the completion date for the project – 2027. No, we aren’t talking about the world’s tallest building here. This will not move the scale anywhere other than Adelaide. But consider this.
Should history repeat, then these tier 2 (and more regional) capitals like Adelaide, Hobart, and Darwin experience their own land market peaks right at the near-conclusion of the broader Australian 18.6-year Real Estate Cycle. And should history repeat, are we looking at one of the final consequential construction projects either near or at the peak of the cycle here?
That’s why Australian real estate investors and followers of the land markets need to watch this closely. And keep a close eye peeled for further news about even bigger projects that may align with this timing.
Because both here and across the world, the end is nigh. Everything we expect to be seeing and reading about is here, the set-up for the final blow-off top is lining up.
And I can’t in all good conscious end this newsletter this week without asking you – are you ready?
Do you understand and appreciate just how different your world becomes on the downside of a land-price led recession? Below the sheen of a booming property sector, Australia is sick. Living standards are rapidly slipping. The cost of living continues to escalate.
And once the land markets peak then bust, what ‘precisely’ is left to save the economy?
The time to prepare for a crisis is not when you are in crisis – it is now. I ask you now to become our latest Boom Bust Bulletin (BBB) member and get prepared. Let the BBB guide you on the inherent timing of the economy only knowledge of the land market can give you.
Each month this history and knowledge will be yours via monthly written editions and video postcards that will help explain the real estate cycle like never before.
For the moment sure, enjoy the party while it lasts. But take my word for it, I know just how badly the party actually ends. There is now a small window where you can have a clear mind free of emotion to start planning your own end game.
That same time is what knowledge of the real estate cycle is providing you. Do not waste it.
Sign up now.
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