Skyscraper Index fingers Melbourne

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The Skyscraper Index is described by Wikipaedia thusly:

The Skyscraper Index is a concept put forward in January 1999[1] by Andrew Lawrence, research director at Dresdner Kleinwort Wasserstein,[2] which showed that the world’s tallest buildingshave risen on the eve of economic downturns.[3]Business cycles and skyscraper construction correlate[4] in such a way that investment in skyscrapers peaks when cyclical growth is exhausted and the economy is ready for recession.[5] Mark Thornton’s Skyscraper Index Model successfully sent a signal of the Late-2000s financial crisis at the beginning of August 2007.[6][7]

The buildings may actually be completed after the onset of the recession or later, when another business cycle pulls the economy up, or even cancelled.[5] Unlike earlier instances of similar reasoning (“height is a barometer of boom”[8]), Lawrence used skyscraper projects as a predictor of economic crisis, not boom.

Believe or not, but the it looks like a reasonable predictor to me:

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In which case the news today about Melbourne has an interesting contrarian feel:

The Victorian Government has given the go-ahead for plans for the tallest building in the southern hemisphere.

The 388-metre high, 108-storey hotel and apartment building is planned for Melbourne’s Southbank area.

Melbourne City Council had opposed the project due to fears it would cast a shadow over the Shrine of Remembrance.

But the Planning Minister, Matthew Guy, says most of council’s concerns have been addressed and the shrine trustees support the project.

“There is absolutely no way we would have brought forward any project where the shrine trustees were concerned,” he said.

“They’ve told us that they don’t object to the proposal.

“That, plus advice from the City of Melbourne, gives the Government a view that we should green-light the proposal.”

Architect Nonda Katsalidis, of Fender Katsalidis Architects says the building, Australia 108, takes its inspiration from the Australian flag.

“I think it’s going to be spectacular,” he told ABC local radio.

“The hotel at the top is designed as a starburst. We took the inspiration from the stars on the Australian flag.”

Mr Katsalidis describes it as a tall skinny building and the point of difference is that is has a 300 room hotel at the top.

“It’s designed to be eye-catching, complex and complimentary with Eureka to give an identity to the city internationally,” he said.

“We don’t have an Opera House but we have a complex culture and all those ideas were thrown into this project.”

Michael Smolders, the president of the Southbank Residents Association, is concerned about the approval process.

“What we need to do is make sure we have appropriate planning structures and schemes in place that are adhered to by the Government,” he said.

“The Minister has taken it upon himself to disregard those guidelines and gone ahead with this particular approval which is totally disastrous.”

The building is expected to be finished in about 4-and-a-half years.

Given Melbourne’s already burgeoning apartment oversupply, and the likely passing of the “Australian moment”, this looks like a pretty good candidate for Australia’s first appearance on the index.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.