Skyscraper Index strikes as Packer gongs huge erection

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Via Domainfax:

Casino giant Crown’s commitment to building the country’s tallest skyscraper is in doubt ahead of a fast-closing deadline, with the company yet to begin seeking any of the required planning approvals.

…Neither Melbourne City Council nor Victorian Planning Minister Richard Wynne’s department has received mandatory updated plans, requested in early 2017, to get the vast project under way before the deadline that requires work to start by February.

…“You’d think they’d be getting cracking if they were serious about building the thing,” one planning expert said. “A lot of money went into that permit … it seems strange they would go to such lengths to get the minister to intervene, and then just sit on it.”

Not if they’re getting good advice. This is a classic “Skyscraper Index” set up for failure. Launch the tallest building project just as foreign buyers and local credit dry up?

Via Wikipaedia:

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The Skyscraper Index is a whimsical concept put forward by Andrew Lawrence, a property analyst at Dresdner Kleinwort Wasserstein, in January 1999, which showed that the world’s tallest buildings have risen on the eve of economic downturns.Business cycles and skyscraper construction correlate in such a way that investment in skyscrapers peaks when cyclical growth is exhausted and the economy is ready for recession. Mark Thornton’s Skyscraper Index Model successfully sent a signal of the late-2000s financial crisis at the beginning of August 2007.

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. Unlike earlier instances of similar reasoning (“height is a barometer of boom”), Lawrence used skyscraper projects as a predictor of economic crisis, not boom.

Careful statistical study has found that the height of buildings cannot be used to accurately predict recessions or other aspects of the business cycle, but that GDP can predict the height of building construction.

Less careful consideration makes the correlation clear.

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.