COVID-19 real estate trends: The fire break or the accelerant?
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James Maydew, Head of Global Listed Real Estate at AMP Capital, explains how e-commerce and flexible working trends have impacted the Australian property market.
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About Debuilt
Debuilt Property provides development and project services to developers, financiers and investors. For financiers and investors we provide specialist due diligence and project monitoring. For developers and property owners we provide development management services and can assist in securing development loans and simplify financier and investor monitoring. We would welcome the opportunity to discuss how we can assist you. Contact Daniel at dburger@debuilt.com.au.
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Residential sector
2400 homes were taken to auction across the capital cities last week, an increase from the 1413 homes taken the previous week and the 1251 homes auctioned the same time last year. The results returned a 74.1% final clearance rate, up from 73.6% last week. CoreLogic has more…
CoreLogic has published a Pain and Gain report for the March 2021 quarter. The report found that profit-making sales increased from 89.1% in the previous quarter to 90.3%, whilst 1 in 10 homes were sold for less than they were previously purchased for. Read more here: Australia’s property market upswing pushes rate of profit-making resales over 90 per cent in March quarter.
According to the AFR, the CoreLogic report revealed that vendors earned $30.6bn in profit in the March quarter, less than the $32.2bn recorded in the December 2020 quarter. This is likely the result of lower sales volumes. (Surging home prices boost profitable sales, Nila Sweeney, 24/06/21)
Rental market
The AFR reports that more than 50% of Australia’s detached housing supply has become unaffordable for tenants as shrinking supply drives price increases. Suburbtrends, a researcher for home buyers, assessed 2809 housing markets, finding that 51% of residential markets require tenants, to spend more than 30% of household income on rent. (Rental affordability worsens as housing supply dwindles, Nila Sweeney, 22/06/21)
OTHER KEY HEADLINES
1. Stockland boss says buyers want bigger homes, further out – AFR 21/06/21
2. Sydney leads national property market as buyers continue to chase houses – The Australian 20/06/21
3. Ballarat Social Housing Gets $80m Boost – The Urban Developer 22/06/21
4. North Quay office tower by Cbus Property and Nielson Properties to house federal public servants – The Australian 25/06/21
5. East Coast Property Sky-High During Covid-19 – The Urban Developer 24/06/21
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Commercial sector
Office
The Age reports that commercial investors are looking for assets in fringe and non-CBD areas which provide greater value for money and flexible working spaces. Vince Kernahan, national director at Colliers, believes that as interest rates have fallen, many tenants may switch to buying, to cap their accommodation costs and benefit from longer term capital gains. (Investors ditch the CBD for improved value and yields, Carolyn Cummins 19/06/21)
The AFR reports that trends in workplace preferences are changing. Property manager Investa surveyed 350 of its tenants, of which 49% said they were unsure if they would maintain their present amount of office space. However, 73% still preferred a central location near public transport and clients, highlighting that CBD markets remain crucial to the growth of the business services economy. (Future of offices a work in progress, Martin Kelly, 23/06/21)
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The amount of subleasing availability in Sydney and Melbourne varies as lockdowns impact work-from-home trends. Victoria has significantly more subleasing stock when compared to NSW. The Urban Developer has more: Downsizing Appetite Remains High in CBD Markets.
OTHER KEY HEADLINES
1. Victorian property taxes take a toll on Vicinity’s mall values – AFR 21/06/21
2. Chadstone turns to offices in nod to future – The Australian 23/06/21
3. Zoom CEO says five days in the office will not return as hybrid work model goes mainstream – The Age 23/06/21
4. Build it and they will come: Scape backs students digs projects – AFR 22/06/21
5. Online Retail Drives Industrial Demand Up 35pc – The Urban Developer 22/06/21
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Construction & development
According to The Australian, policies adopted by both the NSW and Victorian governments have led to a reduction in the construction of high-rise buildings. This is in contrast to cottage developments which are booming and the cities continuing to expand. In NSW, planned legislation will increase the cost of building a $1m apartment by 20-30%. In Victoria, high-rise development has suffered as investors no longer gain stamp duty concessions on off-the-plan projects. (Stopping high-rise apartment projects, by stealth, Robert Gottliebsen, 21/06/21)
The AFR reports that KPMG and Mirvac are joining forces to develop a blockchain-based platform which monitors and rates the trustworthiness of different buildings. Materials used, construction methods, and subcontractors involved in the design, procurement, construction, and certification processes will all be stored in the platform. It is being developed for the NSW government, but may have a global scope. The platform is due to be completed within 6 months so it can be road-tested on existing buildings undergoing cladding ramifications in NSW as well as new Mirvac developments. (How trustworthy is your building?, Michael Bleby, 24/06/21)
The Age reports that Stockland, one of the country’s biggest landlords, is trialing a new land banking system. It plans to deliver 3000 lots manufactured for the retirement sector in a horizontal residential for rent model. Under the scheme, a resident buys the house but rents the land from Stockland. The residents also pay a weekly fee covering maintenance of common facilities. (Stockland explores affordable land lease housing as sector booms, Carolyn Cummins, 23/06/21)
More homes than ever before are being built in Australia, spurred by the HomeBuilder program. The construction industry may be unprepared for this boom as major delays and soaring costs mount due to a global timber shortage. Despite domestic timber production being up 17%, the sector has been unable to keep up with demand. ABC News has more: Australia is seeing a housing boom, but builders are struggling to get the timber to make them.
OTHER KEY HEADLINES
1. Skyview apartments in Castle Hill should be permanently monitored, report finds – ABC News 24/06/21
2. NSW cladding remediation to kick off this year – AFR 23/06/21
3. House Prices Keep Ticking Despite Slow Population Growth – The Urban Developer 18/06/21
4. Pressure Mounts on Sunshine Coast Land Supply – The Urban Developer 23/06/21
5. Builders back moves to boost homeownership – Master Builders Australia 19/06/21
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Planning sector
Covid-19 has disrupted the prior trajectory, scale and form of urbanisation. Planners are now more focused on the vulnerability of cities to natural hazards and other threats. The impacts of the pandemic have highlighted de-growth and counter-urbanisation trends, with Australian capital cities experiencing a net loss 11,200 people in 2020. The Conversation has more: COVID has disrupted our big cities, and regional planning has to catch up fast.
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Finance sector
Lending
The Age reported that CBA predicts the RBA will hike interest rates as early as November next year. The RBA has previously stated that it does not expect wage growth and inflation to be high enough to lift the cash rate until 2024 at earliest. However, with unemployment at 5.1%, and businesses complaining of staff shortages, many analysts believe change is necessary. (Interest rates could rise: Economists warn homeowners about higher repayments in 2022, Shane Wright and Jennifer Duke, 23/06/21)
According to the AFR, single first home buyers made up 38% of all home loan applications received by ME Bank over the past year. The average size of the mortgage that first home buyers are taking out has also risen during the pandemic reflecting higher housing prices. (Solo buyers a growing force in the housing market, Nila Sweeney, 23/06/21)
Tax/reform
Best Hoopers Lawyers has outlined who the winners and losers are from the stamp duty and land tax amendments announced in Victoria’s state budget last month. The new premium general rate of 6.5%, coupled with the foreign purchaser surcharge rate of 8%, could mean that foreign purchasers pay up to 14.5% of stamp duty on purchases of residential land, likely deterring foreign investment in our residential market. Read more from Best Hooper Lawyers…
NSW Budget
According to the AFR, the NSW budget has predicted that the state will return to surplus by 2024-25. One of the changes introduced in the budget on Tuesday required landowners to pay the government, when they sold or subdivided land that had risen in value due to nearby government spending on public infrastructure. The changes are expected to raise an extra $250mn a year in revenue. (NSW property developers face extra taxes, Aaron Patrick, 22/06/21)
In FY20/-21, stamp duty revenue in NSW totaled $9.379bn, a sharp increase on the $6.95 in 2019/-20. Some in the industry believe that the NSW budget has reaped the rewards of the booming property industry, without addressing key supply and demand issues. The chronic undersupply of land in the state was largely unmentioned within the budget. The Urban Developer has more: Stamp Duty Windfall Shores Up NSW Budget.
Also announced in the NSW budget was a $250mn boost for Aboriginal housing. The implementation of this new initiative is critical, with previous public housing policies being imposed on Aboriginal communities which were based on non-Indigenous ideas of good housing. The Conversation outlines important lessons for Indigenous housing policy as well as what culturally responsive housing could look like. Read more: Aboriginal housing policies must be based on community needs — not what non-Indigenous people think they need.
OTHER KEY HEADLINES
1. Stamp Duty Windfall Shores Up NSW Budget – The Urban Developer 22/06/21
2. The RBA again signaled it will stick to its 2024 interest rate plan, even as banks predict a hike as soon as 2022 – Business Insider Australia 24/06/21
3. NSW doubles down on land tax plans, even as stamp duty windfalls prop up the budget – ABC News 22/06/21
4. Luci Ellis says RBA committed to low rates post-Covid with full employment a priority – The Australian 23/06/21
5. What can’t last, won’t: six reasons to expect residential property price gains to slow – AMP Capital 18/06/21
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Australia: Gottlieb House, Caulfield
Wood Marsh Architecture
Commissioned by the Gottlieb family in 1989, this exceptionally brutalist home 'carves positive space out of negative spaces'. The surprisingly homely dwelling is clad by industrial concrete slabs, with windows that expose the greenery outside. Read more on The Local Project...
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Spain: Now you can finally stay in Antoni Gaudi's First-Ever Designed Home
Architectural Digest
Legendary Spanish architect Antoni Gaudi's first home is now listed on Airbnb. The visionary behind La Sagrada Familia designed this house in Barcelona in the 1880s, and it is now available for one night only.
Read more on Architectural Digest...
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