Activity levels into November have seen strong reductions from the previous quarter, both in terms of numbers of new listings and also anticipated demand looking forward into the New Year. This shows a marked decrease from the previous quarter, and as we had suggested in June, that September/October would be a “litmus test” for the market going forward.

There has been much discussion in the past month as to the well-publicised job losses within some of our prominent Melbourne practices during October. We firstly want to report that whilst these losses have occurred; that the number of personnel let go from some firms has been wildly exaggerated, with one example of a prominent practice having retrenched between 40 and 75 staff – the reality is actually only 6!!!! Whilst many staff that were retrenched are still yet to return into positions, many others who have been flexible have found employment.

This is not to underestimate the uncertainty that is creeping into confidence levels within the market - new project starts in the medium to larger scale sectors are generally uncertain for the new year, and whilst many practices are suggesting February to March as the next period that will give some clarity, many firms are still looking to secure projects in this period.

This market has resulted in employment practices changing for groups that are currently recruiting. Some are taking the time to interview a larger number of prospective applicants with a greater focus on specific project backgrounds, whereas previously “good experience” was all that was required. There has also been a swing to contract engagement for a defined period rather than permanent salaried appointments.

Whilst we are yet to see any noticeable trend in regards to salaries over contract rates, the high-end salaries that were occurring in June are no longer being offered. Some practices that are busy have indicated that they are deferring any new recruitment, taking a conservative stance even though current project demands suggest that they should be engaging new personnel.

Importantly, the feedback we are receiving is that developers are still keen to progress with projects, believing that user demand is certainly there, and this extends across residential, apartment, commercial and mixed-use sectors. The primary issue is available finance to underpin these projects as Property and Mortgage trusts have been hit hard by the Government’s “Bank Guarantee” and the resultant flow of funds to Banks. In the medium to longer term, business and consumer confidence could become an issue, and certainly the wide and generally inaccurate viewpoints coming from the media (with these spanning the gamut of “Depression” through to “soft-landing”) are using emotionally charged terminology rather than basing judgments on clear realities. As an example, a well known paper in August reported an unquoted source as stating house prices in Victoria could drop by 60% over the next year – 3 pages later it quoted a well known economist as stating house prices may in fact increase due to demand with the most likely outcome aggregate increase of 1% to 2%.  Guess what is real and what is emotional?

At this point, we all need to see some rational discussion; the newspapers and services report accurately and then credit starting to flow again into property development. The direction where it will flow, and under what conditions it will be awarded will also give clarity to where the market will head into 2009.

On a positive note, Government expenditure seems set to come into various institutional and infrastructure sectors in the coming months, however the extent and timing of this expenditure is still to be fully confirmed.

Whilst there are issues in the markets, we are still seeing sectors of the market that are quite bullish, with the biggest change in the recruitment market showing a shift away from larger firms and projects.

In terms of specific project sectors, health and education are leading the way, with groups that have a mixture of private and institutional clientele having positive outlooks as well. Offshore projects being undertaken locally are also providing strength to many practices, however international competition is becoming stronger for these projects as practices based in the USA, England and Europe are becoming more aggressive in their hunt for work.