The next 12 months will change business for the big banks. The successful commercial office market and struggling retail market are also featured in this edition of The Debuilt Debrief.

EXPERT COMMENTARY

2020 Looms as a Watershed Year for the Big Banks

NEWS SUMMARY

Key Themes:

• The residential market continues to grow from strength to strength

• Australia’s office market is reaching record-high prices

• RBA rate cuts have not triggered spending, much to the dismay of retailers

• Canberra’s Building Minister’s Forum this week will focus on construction defects, particularly cladding issues

Residential Market

The AFR reported that the latest ABS statistics reveal that in the September quarter property prices rose by 2.4%. This is the largest increase since December 2016. Sydney and Melbourne led the growth with Brisbane and Hobart close behind. (Nila Sweeney, 10/12/19 – Property prices post biggest gains since 2016)

The Urban Developer explains the ABS’s findings in its article ‘House Price Growth Continues at Record Pace’.

The Age reported that Stockland’s CEO Mark Steinert is tipping house prices to increase 5 to 7% in 2020 because of lower interest rates and softer lending criteria. Interestingly, he indicated that half of Stocklands current customers are first-home buyers. (Carolyn Cummins, 09/12/19 – Stockland chief tips up to 7 per cent house price gains)

The Age also reported that first-home buyers will be shut out of the housing market if price surges continue as predicted. Despite the government’s First Home Buyers Deposit Scheme, increasing prices, future capital gains and falling mortgage rates will likely result in more investors entering the market.  This will push out first home buyers looking for a similar product – apartments. (John Collett, 06/12/19 – Window to slam shut for first-time buyers as property prices surge)

Commercial Sector

The consensus in the media confirms that 2019’s commercial market moved from strength to strength.

The Australian reported that commercial property markets have had a good year. Firm yields have seen industrial property investments offering the strongest inflows of capital. Industrial yields have previously been far higher than other commercial sectors. They have now lowered to be equal with the others as their value increases, proving the strength of the capital growth. Investments in healthcare and childcare have also increased significantly. Retail remains the sector which struggles the most. (Frank Gelber, 11/12/19 – Good year for commercial markets but period of firming yields is ending)

Commercial property transactions are estimated to beat last year’s record price of $37.8bn according to The Australian. CBRE’s preliminary data for 2019 shows $37.2bn worth of projects, with many major deals still currently under negotiation. Despite a drop in the number of transactions, larger trades went ahead, driven by mergers, private equity deals and structural changes to shopping centres. Offices had the largest increase of all commercial sectors, from $17.8bn in 2018 to $23bn this year. (Ben Wilmot, 12/12/19 – Office sales lead property earnings)

M3property believes this is the result of low vacancy rates and predicts more growth in 2020. Read their findings on Commo.com.au – Low vacancy/rents to drive Sydney and Melbourne office growth in 2020.

Finance/Spending

The AFR reported that despite property price rises, Christmas spending is unlikely to increase much to the dismay of the retail market. 94% of AFR readers said they would not spend more than last year. This counter’s the RBA’s expectation that the property market’s rebound would trigger consumer spending. (Liz Main, 09/12/19 – Property upswing won’t spur spending: AFR readers)

Retailers are facing the consequences of this, with Harris Scarfe collapsing into receivership this week, as reported in the Australian. Many predict that more companies will follow. (Ben Wilmot, 12/12/19 – Harris Scarfe collapse bad news for malls)

The Australian also reported that Deloitte believes there may be a spending boost in the new year. It expects stronger wage growth, a surging housing market and moderating price pressures to stimulate demand for retailers. (Ben Wilmot, 08/12/19 – Retail uplift to come after Christmas)

Construction Defects

The AFR has highlighted insurance complications as the main issue to be discussed at this week’s Building Ministers Forum in Canberra. In the wake of Australia’s flammable cladding issues, Ministers are attempting to introduce long-term solutions. But industry professionals are seeking immediate assistance with renegotiations for lower insurance premiums. (Michael Bleby, 10/12/19 – Building ministers, industry at odds over insurance fix)  According to the AFR, State governments have allowed building surveyors and other professionals to operate with cladding-related exclusions on their PI policies. Certifiers have requested that the Building Ministers Forum release information on the extent of risk, so insurers can be understand the limits of their potential exposure. (Michael Bleby, 08/12/19 – ‘Nobody knows what’s going on’ ahead of Building Ministers’ Forum)

The Age announced that a panel has been appointed to review laws surrounding the flammable cladding in Victoria. The Building Act has not been substantially reviewed since 1993, and this panel is set to modernise it. (Noel Towell, 10/12/19 – Britain’s Grenfell tragedy expert gets in on Victoria’s Building Act)

Read about the panelists in ArchitectureAU’s article Victoria’s building regulation to be reviewed.

DESIGN & ARCHITECTURE

Spiral lookout tower gives views of the mountains in Shenzhen

dezeen.com
Architecture studio Doarchi has designed a 15m high lookout which offers incredible views of rural China. Read more on dezeen…

To learn more about Debuilt Property please visit www.debuilt.com.au or email either Paul: pabrahams@debuilt.com.au or Daniel: dburger@debuilt.com.au.

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