Expert commentary

What is Regenerative Architecture? Limits of Sustainable Design, System Thinking Approach and the Future

Residential sector

In a summary of key trends in the nation’s property market this year, the Australian reported that fewer homes were sold this year compared to 2021, which was largely attributed to rate rises and uncertainty. CoreLogic’s Eliza Owen said that the pandemic had set unrealistic expectations for property sales volumes as 620,000 properties were sold last year, which was the highest number since the early 2000s. Corelogic data showed that 535,000 properties were sold throughout 2022, and that the top ten sales nationwide totaled $386.3m in combined value over this period; this shows strength in the Australian market despite the downturn. (Fewer sales did not stop big property deals in 2022, Mackenzie Scott, 13/12/22)  

Corelogic reported that two significant trends in the price correction this year were the resilience of affordable markets compared to luxury markets and the steadily slowing pace of decline since September. Read more…  

Rentals 
The AFR reported that NSW will make rent bidding illegal, a regulation change which will prohibit agents from suggesting that prospective tenants increase rent offers to secure properties. This law has already been enacted in Victoria and WA, and will give tenants the legal ability to take perceived unethical conduct to Fair Trade. (NSW plans to outlaw rental bidding, Michael Bleby, 12/12/22)  

REA reported that rent prices in one Queensland suburb has surged by 41.4% from 12 months earlier; Clear Island Waters on the Gold Coast has seen the median asking rent for a house rise by nearly $580 extra to $1400pw. Read more… 

Auctions
The AFR reported that last week’s auction clearance rate hit a five-month low due to rate rises, despite being one of the busiest auction weeks of the year with 2667 homes taken to market. Corelogic data showed that the clearance rate across the combined capitals was 57.9%, bringing doubts about this weekend’s clearance rates as 2300 homes are scheduled for auction. (Auctions fail their big weekend as clearances slide, Larry Schlesinger, 11/12/22)  

House Prices 
Domain reported that dwelling values in some Sydney suburbs have seen decreases of more than 20% this year, and that the ten suburbs which saw the most significant house value declines nationally were all in Sydney. Read more…  

REA reported that over the past five years, 32 Australian suburbs have seen the median home price surge by over 100%. This places the house price correction into perspective, as executive director of research at PropTrack Cameron Kusher said that this national trend does not extend to all locations. The table below delineates the price growth in some of Australia’s best performing suburbs over the past five years. Read more…  

OTHER KEY HEADLINES

1. Double whammy for share house renters as Qld market hits its peak - REA 09/12/22 
2. Gold Coast property market full steam ahead over festive season - REA 12/12/22 
3. Renters locked out of the market as rents surge $300 a week in some Sydney suburbs - REA 13/12/22 
4. Toorak Keeps Crown as Melbourne’s Priciest Suburb - Urban Developer 14/12/22 
5. Canberra’s auction clearance rate drops to pre-pandemic levels - Domain 13/12/22 

Commercial sector

The AFR reported that the inflation driven price correction affecting commercial property markets in Europe and North America could extend to Australia next year. Heitman’s head of global investment research Mary Ludgin said that yield expansion, lower vacancy rates and higher rents across all asset classes point to a downturn across the sector; this has begun to affect industrial and logistics which are usually the strongest commercial assets. (Global correction in commercial property ‘headed Australia’s way’, Nick Lenaghan, 11/12/22)  
 

Retail  
The Urban Developer reported that Lendlease has sold three shopping centres in NSW and Perth from its sub-regional portfolio, with a total value of over $520m. This has set a record as the nation’s largest sub-regional retail portfolio transaction since 2018. The sales were managed by CBRE, who said that the transactions point to continued investor interest in sub-regional shopping centres; the asset class has been productive with over $775m worth of assets sold throughout 2022 so far. (Lendlease Retail Centres Sell-Off Tops $520m, Lindsay Saunders, 08/12/22)  

Offices  
The Urban Developer reported that investors may be shifting focus from A-grade office spaces to B-grade opportunities, as these assets are suitable for refurbishment to meet sustainability requirements. Analysis by Colliers showed that REITs have research departments dedicated to secondary office assets, and that average net face rents for B-grade offices saw year-on-year growth of 6.1% by the end of September; this outpaced growth of other grades of offices over the same period. (Uptick in Interest in ‘Upcycled’ B-Grade Offices, Clare Burnett, 09/12/22)   

RealCommercial reported that office assets were the most transacted commercial assets throughout 2022, accounting for 34% of all sales compared to 27% seen in 2021. Read more… 

Industrial
The AFR reported that industrial rents may rise by over 5% in 2023, and that Sydney will likely see a rise of 11% for rents across the asset class. This year Sydney saw industrial rents rise by 38%, taking super-prime industrial weekly rents to an average of $200/sqm. This is largely attributed to a lack of supply to meet sector demand; CBRE said that 4.6m sqm of warehousing is scheduled to be built over the next two years. (Vacancy rate to drive industrial rents higher in 2023, Larry Schlesinger, 14/12/22)  

OTHER KEY HEADLINES

1. Commercial property market to end the year on a subdued note - Australian 15/12/22 
2. Australian Unity trust buys $220m aged care portfolio – AFR 13/12/22 
3. Melbourne’s Office Occupancy Jumps 12pc - Urban Developer 08/12/22 
4. Indonesian billionaires plan $500m Australian hotel buying spree - AFR 13/12/22 
5. In Sydney’s biggest post-Covid deal, Ashe Morgan and a Japanese partner are circling 60 Margaret St - RealCommercial 09/12/22 

Construction & development

Infrastructure Australia has released its latest Market Capacity report which found improving risk management and proactively sequencing the major infrastructure pipeline will be key to managing the impacts of an overheated construction market, escalating input costs, labour shortages and productivity challenges. Read the full report here… 

The AFR reported that the latest round of insolvencies puts the construction sector under incredible pressure with doubts surfacing that the industry will be able to deliver a $647b pipeline of projects over the next five years. Infrastructure Australia claims that since the COVID-19 pandemic began the construction sector, over all other sectors, has had the fastest rising number of insolvencies. (Contractor collapses expose industry ‘at breaking point’, Jenny Wiggins, 14/12/22)

The AFR reported that legal action has begun against GJ Gardiner Homes, trading as Netdeen, as NSW and WA master franchisee’s claim that they have been trying to block deals and undermine the value of those businesses. One such master franchisee is also claiming that Netdeen made a series of undervalued offers to purchase the business after saying that it did not make sense to continue with the master franchisee model. (Home builder giant accused of cutting out franchise moneymakers, Lucas Balrd, 13/12/22)

A progress report has been released on the NSW Government’s 10 Point Commitment plan to the construction sector. Areas that were flagged for more improvement include risk allocation and industry liquidity. Read more… 

Green Infrastructure 
The Urban Developer reported that new luxury developments are adding communal electric vehicles and state-of-the-art charging stations as a drawcard for attracting residents. Whilst the cost to own an EV outright is high, this model eliminates that hurdle and is also attractive because of the higher costs of living. This trend will continue as all new developments are required to meet the seven Star NatHERS ratings as of May 2023. (Charging Ahead: The Drive to Communal EV in Developments, Nina Hendy, 11/12/22) 

The Urban Developer reported that schools are the latest area to be targeted by NatHERS. Initial data is being collected to allow schools to measure their NatHERS rating and then start to set targets for improving their environmental impact. Whilst the scheme will be voluntary it may create an opportunity for the sector as improvements could generate higher valuations of assets and reduce running costs. (Learning Curve: Education Facilities to Build Greener Pastures, Louis White, 12/12/22) 

OTHER KEY HEADLINES

1. Developer Aland settles $400m worth of units in western Sydney – AFR 14/12/22 
2. Central Element’s $150m Chatswood Tower Approved – Urban Developer 13/12/22 
3. BlueScope wins in new anti-dumping push on Taiwan steel – AFR 12/12/22 
4. BESIX Watpac breaks ground on Microsoft’s new data centre – Inside Construction 12/12/22 
5. Winning design revealed for Powerhouse Ultimo Museum - Inside Construction 12/12/22 

Finance

Domain reported that there are very few places in Melbourne where average households can afford the mortgage repayments. Canstar calculations show that if a couple wanted to keep mortgage repayments to below 30% of gross income, they could afford to purchase a house for $733,913 after each borrowing $587,130. For this amount you could afford to buy in a few middle ring and more outer ring suburbs.  Read more… 

Lending at high debt-to-income ratios has fallen to 17.1% for Q3 of 2002 which is down from its height at 24.3% in Q4 of 2021. But regulators fear what will happen when people who fixed at the extremely low fixed rates from the last couple of years end the fixed rate in the coming year. Read more… 

OTHER KEY HEADLINES

1. CoreLogic signs deal to acquire digital real estate marketing firm Plezzel – CoreLogic 14/12/22 
2. Departing Domain CFO Rob Doyle to be replaced by John Boniciolli – Australian 14/12/22 
3. China’s shadow banks pivot away from property to survive – AFR 12/12/22 
4. Corporate raider Nick Bolton sparks new fight for US residential fund – Australian 12/12/22