The lagged effect on Australian unlisted property markets of material and enduring shifts in monetary policy is well documented. Put simply, Australia is often slower to feel the impact of economic stress than other leading OECD economies. But history tells us that financial shock is more often delayed than avoided. And the most recent opportunities identifi ed by the Dexus opportunity fund, Dexus Real Estate Partnership 1 (DREP1), suggest that a cyclical recalibration of property markets is already in train.

Owners, borrowers and lenders are already re-casting financial models designed to prosper through an era of low interest rates, looser credit, modest infl ation and resilient consumer confi dence. Australia is now 18 months into the most rapid increase in interest rates on record. The market has started digesting the size and duration of these interest rate moves. We have seen the listed property market reprice with shares trading at a large discount to net tangible assets. We have seen credit markets re-price too, with borrowers paying wide margins because of the scarcity of capital available for real estate generally and development particularly.

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