By Scott Keck | Chairman, Charter Keck Cramer
Scott Keck is Chairman of Charter Keck Cramer. Scott has over 50 years’ property valuation and corporate real estate experience across the national markets. As an experienced independent practitioner Scott provides specialist strategic and mediation consulting services, including an emphasis on land acquisition for major infrastructure projects. A highly regarded and regular contributor to the national media and business magazines, Scott has published over 500 articles on topics related to the property market. Scott is a member of Charter Keck Cramer’s Board of Directors.
Australia has become a very property centric society, both for individuals and also significantly in the corporate sector for Managed Funds and REITS, due to a very favourable and inducing tax and superannuation environment. This has sustained a long period of almost uninterrupted growth during which, as a community, we have become faithfully confident in compounding performance and reliable risk adjusted returns. We are, however now probably entering into a phase of possible Capital Gains Tax reform and a changing property investment and development market which will be affected by both positive and negative influences, summarised as follows:
Positives
Baby boomer capital
Acute supply shortage - strong demand at right price point
Government subsidy for social and affordable housing
Interest rates easing
Costs slowing
Techno advance / modern methods, prefab
Gradually supportive Government policy
Economic step back from stagflation
Negatives
Covid legacies
High construction costs
Low affordability
Contractor insolvency
Regulatory and zoning constraints
Infrastructure deficiencies and levies
Environmental and climate concerns
Foreign investor taxes
Financial complexities including statutory charges and capex
Global uncertainties
Whilst I don’t underestimate the risk, I do view residential development mainly as a process of calculated SUPPLY whereas commercial development including retail, industrial and office is more complex, carries greater risk and rather than providing supply, provides negotiated, invariably underwritten SOLUTIONS … both of course require patience and persistence but the commercial sector generally requires higher levels of development management, negotiation skills and of course commencing capital. Usually participants are one or the other but not both. If you want to be involved I think you need to strategically commit to one sector.
Notwithstanding current headwinds which require planning, taxation and labour reforms and which also include sector insolvencies and slow design and construction innovation, there are immediate and emerging opportunities. Amongst current projects and proposals in our office or of which we are aware I mention:
Downsizer luxury apartments
Social and affordable housing
Medium rise residential and mixed use projects
Land lease projects
Residential to rent / BTR with a twist (student and retirement accommodation)
Value add v. passive
Regional opportunities
Adopting existing building built form provides planning and timing advantages
Master plan centres
PPPs … working with Government
Office refurbishments
Large mixed use inner urban infill sites
Having summarised examples of current potential viability, the question may well be how does one find such opportunities ... the answer is in part that as always there is the entrepreneurial awareness of opportunity and intuition that successful developers and investors demonstrate … those who live and breathe the property markets … but even they increasingly rely upon the support, guidance and analysis of research agencies. They may intuitively sense an opportunity, but invariably through the process of research discard many prospects before making a commitment. And to be emphasised, don’t underestimate the relatively recent strong resource of AI … more often than not is likely to point you in roughly the right direction.
Another source of engagement which is quite common is to be willing to consider Joint Venture opportunities …there are many property professionals, particularly for example architects, planners, project and development managers, even valuers who may have insight and viable proposals but lack capital ... if you maintain an active and wide property network you will experience that awareness invariably leads to opportunity. The majority of projects that pass through our office do involve joint ventures one way or another … usually passive equity capital joining with development and project management expertise.
There are mixed views about the challenge of residential under-supply, yet the need for long-term population growth through migration to boost productivity. Inevitably, Australia’s economic future security depends on a substantial increase in economic growth which means a much larger population which will be sourced through migration mainly from the Asian region, China, India, Bangladesh and Pakistan. As our community embraces this prospect we will also experience cultural change as our population transitions to a higher Asian proportion of our population. Simultaneously there will inevitably be an increase in the percentage of households that rent rather than owner occupy.
As community growth and cultural and economic impetus feeds mainly into the economies of Victoria and New South Wales, there will be increasing opportunity for residential and infrastructure development and investment across all sectors. Currently there may understandably be some negativity about the property sector in Victoria but the medium to longer prospects offer assessable opportunity as statewide community expansion drives continued demand in all built form sectors.
This article has been republished with permission from the author, Scott Keck, Chairman Charter Keck Cramer.