Could Tasmania become Australia's Finland and end Homelessness?
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In this week's article the author addresses Australia's housing crisis and homelessness, stressing the necessity of a national housing strategy. They highlight the economic and social costs of inadequate housing and suggest short-term solutions using vacant buildings, a medium-term plan for affordable housing, and a long-term vision for potentially ending homelessness in Tasmania, taking inspiration from Finland's success in this area.
- Paul Abrahams & Daniel Burger, Directors at Debuilt Property
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Project focus - 10 River Street, South Yarra
Debuilt provided due diligence services to Merricks Capital, the financier of the latest Alfasi Property development at 10 River Street, South Yarra. The focus for Debuilt was assessing and mitigating financier risk in order to progress to financial close. This is an incredible project and Debuilt would like to commend Merricks Capital and Alfasi Property on their second significant project partnership. We look forward to continuing to work with the project team on the loan monitoring through to successful completion.
If you have any requirements for project due diligence and risk mitigation, please get in touch with Daniel dburger@debuilt.com.au or +61 414 342 704.
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Residential sector
The AFR reported that despite a surge in properties at auction reaching a seven-month high, auction clearance rates remained strong, hovering above 70%. The combined capital cities' preliminary clearance rate dipped by 2% to 72%, with around 2400 homes scheduled for auction. Melbourne experienced a notable increase in listings, rising by 24% from the previous week, resulting in a preliminary clearance rate of 69.9%. Although clearance rates eased from their May peak, experts noted steady listings and sustained demand, suggesting minimal impact from rate hikes and unemployment rise. (‘Cashed-up’ Toorak buyers can’t find anything despite jump in auctions, Larry Schlesinger, 27/08/23)
The first week of spring Auction Market Preview - 3 September 2023 is here, from CoreLogic.
The AFR reported that mortgage refinancing likely peaked at 24.2% of PEXA’s transactions last year and is expected to remain stable as the market rebounds, according to PEXA, a digital conveyancing platform. Property transactions, which decreased for a third consecutive six month period, have possibly reached a low point as well. PEXA indicated positive signs and a bottoming out of the market, suggesting that while refinancing will stay strong, it may not be as pronounced due to market improvements. The company's data reveals rising sales settlements after a weak first half, reflecting increased confidence among vendors and buyers despite multiple interest rate increases. (Mortgage refinancing has probably peaked, PEXA says, Michael Bleby, 27/08/23)
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The Australian reported that a record 1.5 million Australians faced potential mortgage stress in Q2 due to significant cash rate increases. Roy Morgan's research indicated that 29.2% of borrowers were at risk, up from 28.8% in the previous quarter. This marked an increase of 642,000 individuals compared to the previous year, with 20.3% considered "extremely at risk." The situation was heightened by rising interest rates and cost-of-living pressures, leading to slightly higher overdue mortgage repayments during Q2 2023. (About 1.5 million Australians at risk of sharpest cash rate hikes in decades, Paulina Duran, 28/08/23)
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The AFR reported that house rents in 20% of all suburbs across the nation have dropped by up to 6% in the last three months, driven by affordability concerns. However, a persistent undersupply of rental properties may limit substantial declines in the near future. Sydney's expensive eastern suburbs experienced the most significant rent drops, especially for houses. However, with strong rental demand due to high net overseas migration and limited supply, pronounced rent decreases are unlikely, though certain areas could experience a slowdown or small decline in rental growth. Hobart and Canberra faced the weakest rental markets due to falling demand and increased supply. (House rents drop in 20pc of all suburbs, Nila Sweeney, 27/08/23)
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CoreLogic reported that rent growth is projected to slow in 2024 due to three factors:
Interest Rates: Anticipated cash rate decline may boost investor activity, increasing rental supply and dampening growth.
Income Growth: Weaker income growth could prompt renters to adjust housing preferences, affecting demand.
Affordability: High rent growth strains affordability, potentially capping how high rents can go before adjustments are made.
Despite this slowdown, rental affordability challenges will persist, warranting ongoing reforms like building more homes and improving rental quality standards. (Three reasons rent growth will slow in 2024, Eliza Owen, 29/08/23)
The AFR reported that rising by 10.6% to 806 since February, the number of suburbs with homes valued at $1m or more has surged, reflecting a sharp housing market rebound, as reported by CoreLogic. While four suburbs newly entered this club, 81 returned in the past year due to a 4.1% house price increase since February. CoreLogic's Eliza Owen noted that as long as the market is on the upswing, more areas could join this "million-dollar club," extending its reach beyond Sydney and even into smaller markets like Adelaide. Over 31.3% of suburbs in combined capital cities now boast million-dollar homes, up from 28% in February, prompting concerns about affordability and wealth distribution. (Housing affordability worsens as pool of million-dollar suburbs swells, Nila Sweeney, 28/08/23)
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OTHER KEY HEADLINES
1. Downsizing – the housing solution that is just too hard – AFR 29/08/23
2. Sydney house prices higher than a year ago – AFR 29/08/23
3. Airbnb providers in Melbourne face $350 fee by February – AFR 30/08/23
4. Three top sites Defence could sell for new homes – AFR 29/08/23
5. Rising house prices entice homeowners to sell up in time for busy spring market – Domain 29/08/23
6. International migration: Melbourne sees record spike in student housing growth, rebound in aged care population – REA 27/08/23
7. Property listings rebound could dampen price growth this spring – REA 28/08/23
8. What’s on the other side of the fixed-rate cliff? – REA 28/08/23
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Commercial sector
The AFR reported that REITs in Australia have taken a hit of over $6bn in the 2023 financial year due to write-downs, particularly in office property values. Despite a relatively modest 1.9% YoY decline in the sector, office sectors experienced sharper falls, with certain portfolios registering valuation drops of 9 to 11%. However, some fund managers believe that office values might further decrease due to higher investment yields and debt costs. On the other hand, larger malls have shown unexpected resilience. Despite this, analysts suggest that the A-REITs sector may rebound faster than anticipated due to various factors like shopping malls' positive performance and improved fundamentals across retail, industrial, and specialty REITs. (Offices on the nose as REITs take $6b hit, Larry Schlesinger, 30/08/23)
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Retail
The Australian reported that big shopping malls are regaining their appeal as attractive asset classes, with investors showing increased interest in buying major retail property assets. This shift comes as major retail landlords, such as Scentre Group and Vicinity Centres, deliver strong financial results and positive operational performance. Despite concerns about high interest rates impacting consumer spending, well-performing shopping centers are drawing more shoppers, offering various services and entertainment options. The industry is undergoing a pricing reset as billions of dollars' worth of shopping centers are up for sale, and investors become more confident in retailers' ability to navigate the shift to e-commerce following the pandemic. (Big malls are back in fashion, Ben Wilmot, 30/08/23)
Industrial
The AFR reported that logistics projects in the Kemps Creek area of Sydney are facing delays and unexpected costs due to stormwater-related challenges, as well as infrastructure development contributions. Major developers in the region, including GPT Group, Stockland, Mirvac, Dexus, and others, are working with Sydney Water, the NSW Government, and Penrith City Council to find solutions. The Kemps Creek precinct was rezoned in 2021 as part of the Aerotropolis development ambitions, with plans to create a $10bn logistics hub. However, stormwater issues and additional costs have caused delays in the development of the area, impacting the growth of large-scale logistics in the Sydney Basin. (Stormwater problems hit logistics projects at Kemps Creek, Robert Harley, 30/08/23)
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BTR
The AFR reported that Mirvac's BTR lead, Angela Buckley, has expressed concerns about the proposed thin capitalisation changes by the Albanese government in Australia. Thin capitalisation changes aim to reduce interest payment deductions available to entities with a high level of debt and relatively little equity. According to Buckley, these changes could offset the incentives from tax cuts for managed investment trusts (MITs) related to residential build BTR projects and discourage investors from the sector. She believes that without amendments to the proposed changes, it could be challenging to deliver BTR projects. (Mirvac says proposed tax changes will make BTR challenging, Campbell Kwan, 30/08/23)
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OTHER KEY HEADLINES
1. WeWork troubles put $900m in rent at risk in Australia – AFR 27/08/23
2. More than one-third of desks globally sit empty all week – AFR 27/08/23
3. Frozen Redcape sells Queensland pubs for $28m to Star Group – AFR 29/08/23
4. Treehouse Hotels to open in $400m Market Square development – The Australian 28/08/23
5. Lindeman Island owner makes $110m Sydney CBD swoop amid hotel boom - The Australian 30/08/23
6. Erina Fair next to go as South Korean stakeholder puts its share on the market - The Australian 30/08/23
7. Wheat king Ron Greentree buys Quintis’ WA sandalwood estate – AFR 27/08/23
8. UK-based Australian businessman Mark Scherrer acquires Eyre Peninsula farm site – The Australian 28/08/23
9. Mt Jagged Wines wins approval for $10m luxury cellar door – The Australian 28/08/23
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Construction & development
The AFR reported that new housing approvals in Australia have reached a four-year low, posing challenges to the federal government's revised target of constructing 1.2 million new homes in the next five years. Both detached houses and attached homes have experienced declines in approvals, totaling 174,051 for the 12-month period. The drop in approvals, along with weakened data indicating the value of residential construction in FY23, puts the achievement of the housing target in doubt. Economists suggest that higher interest rates, delays, and cost escalations have contributed to the decline in housing activity. This trend could impact housing affordability and renters in the market. (Falling housing approvals cloud 1.2m homes target, Michael Bleby, 30/08/23)
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The Real Estate Conversation reported that residential building approvals in Australia for July 2023 have continued at low levels, particularly in multi-unit developments, according HIA. The ABS reported an 8.1% decrease in total building approvals for July, with a 19.9% decline in multi-unit approvals and a more modest 0.1% decline in detached house approvals. Despite the slight improvement in the rate of decline for detached house approvals, the overall market conditions remain dampened. The supply-demand imbalance in housing is a concern with implications for both the housing market and the broader economy. (Approvals for multi-units dip in July – HIA, Tom Devitt, 30/08/23)
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The Australian reported that home builder Simonds Group has reported a loss of $23.3m for the FY23, compared to a deficit of $9.7m in the previous year. The company cited labour shortages, wet weather, and inflationary pressures as factors contributing to the loss. Despite the challenges, Simonds Group highlighted its healthy liquidity and positive outlook. The company revealed that it has also been completing homes abandoned by building companies that have collapsed in recent years, offering a new source of income. (Simonds Group loss widens as building industry troubles continue, Glen Norris, 28/08/23)
The Intergenerational Report has been released and Build Australia has highlighted its opportunities in the construction industry. Read more here.
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OTHER KEY HEADLINES
1. Failed building firm owes $2.4m, leaves 38 homes unfinished – The Australian 26/08/23
2. China’s Dahua puts $100m Melbourne estate on market – AFR 29/08/23
3. End planning quagmire, says Meriton boss Harry Triguboff as he fights for Little Bay project – The Australian 30/08/23
4. Engineers discover strengthening power of coffee for concrete use – Build Australia 29/08/23
5. $50 million boost for Queensland’s construction industry – Inside Construction 30/08/23
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Finance
The AFR reported that a parliamentary committee in Victoria has recommended that the state government consider replacing stamp duty with a broad-based land tax as a way to improve housing affordability. The committee's report highlights that stamp duty is not an equitable tax and disproportionately affects younger people and older individuals with fewer resources. The report also suggests that the Department of Treasury and Finance should regularly review stamp duty rates to adjust for bracket creep. The Victorian government is expected to respond to the report within six months and is also planning to announce a series of housing reforms in the near future. (Andrews urged to scrap stamp duty to ease housing crisis, Gus McCubbing, 29/08/23)
The AFR reported that the Australian dollar and bond yields briefly dropped after a lower-than-expected CPI reading for July. Inflation slowed to 4.9%, falling short of the forecasted 5.2%. Following the data release, financial markets now indicate a higher probability of a cash rate cut by December 2024, with a 75% chance. This contrasts with a roughly 50% chance before the data release. Additionally, traders have reduced bets on further rate rises, with a 37% chance of a rate increase to 4.35% by the end of the year, down from 48% before the data. The RBA is expected to keep the cash rate at 4.1% for the next meeting. (Traders sharpen rate cut bets after CPI slows, Cecile Lefort, 30/08/23)
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The AFR reported that despite a broader slowdown in inflation, rents, insurance premiums, and electricity prices in Australia are rising significantly. The annual inflation rate fell to 4.9% in July from 5.4% in June, primarily due to easing price pressures for food and non-essential goods. However, rents surged by 7.6% over the past year, the fastest pace of rent inflation in over a decade, driven by an acute shortage of properties. (Rent, power prices defy inflation slowdown, Michael Read, 30/08/23)
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OTHER KEY HEADLINES
1. Inflation data gives RBA another reason to pause, but risks ‘haven’t entirely abated’ – Investor Daily 30/08/23
2. Resimac forecasts less competition in home loan space after profit dives 35 per cent to $66.5m – The Australian 29/08/23
3. Catalano and Waislitz’s venture set to buy out View.com.au – AFR 27/08/23
4. Nido kicks off $99m IPO book-build with AustralianSuper as cornerstone – AFR 29/08/23
5. Johns Lyng Group surges on strong year, rosy outlook – The Australian 29/08/23
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1. Sydney Design Week: Communal Cities - 15 Sep 2023 to 24 Sep 2023, Sydney
Powerhouse Museum will be hosting a series of events during Sydney Design Week as part of its Communal Cities program. The stellar line-up will explore topics relating to urban design, the climate crisis and community engagement.
Scheduled events include 100 Climate Conversations: Jeremy McLeod Carbon Neutral Buildings, Punchbowl Mosque, Phive Alive, Ripple Effects - Parramatta Walking Tour, Building Communities Symposium, Architecture Amplified: Building Communities, Phive Building One Year On, Imagine A City: Drawing Workshop, Writing Rooms at the Whitlam Prime Ministerial Home, Lacation & Vassal: Living in the City.
2. International Theatre Engineering and Architecture Conference 2023 - 19 Sep 2023 to 20 Sep 2023, Brisbane
The International Theatre Engineering and Architecture Conference (ITEAC) is the leading international gathering for those involved in conceiving, imagining or making the places we experience performance. The 2023 event is a truly hybrid industry conference, combining online connectivity with Hubs in London, Sao Paulo, Hong Kong – and for the first time ever, Australia, hosted by the QUT Design Lab in Brisbane.
3. International Council on Monuments and Sites (ICOMOS) General Assembly - Thursday, 31 Aug 2023 to Saturday, 9 Sep 2023, Sydney
The world heritage body International Council on Monuments and Sites (ICOMOS) will hold its next global General Assembly in Sydney, the first time the event will be held in the Pacific region. The program will include site visits, workshops, lectures, and meetings between heritage experts from around the world. Delegates will visit heritage sites including Sydney Opera House, Hyde Park Barracks and Luna Park, and will also be given the opportunity to visit cities and regions across Australia.
4. 2023 Architecture Symposium - 8 Sep 2023 , 8:30 AM - 5:00 PM, Melbourne
The 2023 Architecture Symposium: Acts of Generosity (Melbourne) will explore the industry’s responsibility to community, curated by Amy Muir and Rachel Neeson. Architecture plays a powerful role in defining and advocating for a position, a place, a landscape that consciously engages with “giving” to build a robust structure to support people and society. Historically, we can understand this through “civic” design typologies – the library, the law court, the town hall, the city square, the memorial or the cemetery.
5. Tools for After - 14 Sep 2023 to 10 Oct 2023, Melbourne
Presented by The Italian Cultural Institute of Melbourne, this major exhibition, held at the Fitzroy Town Hall, will immerse visitors in the world of Italian architecture and its innovative solutions to address the critical challenges stemming from human activities on Earth’s ecosystems and geology. The TFA Architecture Exhibition presents materials of alternative, ecological, natural, and biotechnological for an effective and possible building culture, rather than architects themselves. The program will see proposals ranging from ancient construction culture to vegetal architecture and projects for the environment of people on other planets. The six-week festival will also offer concrete solutions to prevent and face the scenarios that human impact on the climate crisis is preparing us for.
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Tasman Peninsula, TAS: Koonya
Room11
Koonya by Room11 in south-west Tasmania is a unique architectural project that blurs the boundaries between art and architecture. It consists of three interconnected built entities, with architectural features that integrate brutalist forms, carefully planned volumes, and expansive glazing to harmonize with the rugged landscape, reflecting a deep connection to nature and the land. The project includes the Glass House, the Pulmonum monument, and the main house, all showcasing a profound respect for the natural environment of Koonya.
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Singapore: Wilmar headquarters
Eric Parry Architects
Eric Parry Architects designed an office building for Wilmar in Singapore, featuring a unique staggered design with garden terraces and curved balconies across seven floors. The building incorporates outdoor spaces, including a central garden with a skylight, and boasts tree-shaped steel columns. The design harmoniously blends nature and architecture, creating a dynamic office environment in Singapore.
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