Confidence is Key
While not the whole picture, residential property prices are a barometer of a large section of the property industry. Watching property prices rise or — more recently — fall comes close to a national sport and conditions today are fundamentally different to 12 months ago.
As at January 2019, Melbourne house prices had contracted by 7.2 per cent since November 2017. Daily headlines appear to be nothing more than a constant downgrade of expectations, tipping further falls and telling us that there is more pain ahead.
Despite the headwinds, not all hope is lost and the economic fundamentals remain solid.
The Royal Commission and tighter lending conditions
A series of lending restrictions introduced first to cool the residential investment market (and facilitate purchases by owner-occupiers rather than investors) and subsequently, in response to evidence given to and in anticipation of the findings of the Royal Commission into misconduct in the banking, superannuation, and financial services industry have impacted on lending available to the property sector.
Smaller and medium-sized entities are experiencing more limited access to capital. China tightened its outbound lending conditions in early 2018, which affected the market, and when coupled with a range of taxation and approval measures at a state and federal level in Australia further reduced the availability of capital for projects.
The future availability of credit remains a major concern for the property industry. We’ve recently seen the recommendations of the Royal Commission and they largely reflect that lending practices have already shifted, neglecting the need for significant regulatory change.
The political landscape
The Victorian election late last year delivered a government with a clear majority, and that is a good thing for business confidence and certainty. This is especially true for the property industry.
One of the more particular consequences of this is that it should be a lot easier for the government to get the numbers it requires in the Legislative Council, meaning things such as the revocation of planning scheme amendments in the Upper House should be far less common across the next four years.
It was telling that comparing population growth rates and electoral swings demonstrates that six out of 10 of the highest growth suburbs had swings to Labor above the state average swing of 4.7 per cent; population growth isn’t a dirty notion with voters when it is matched to a positive plan for investment in a growing city through major infrastructure projects.
We are closely watching politics at the federal level. It’s vital that federal policy settings work to sustain and promote confidence in the property industry, which is Australia’s largest employer and contributes around 13 per cent of GDP. A healthy and growing property industry underpins our national economic well-being.
Against this backdrop, it’s essential we don’t make changes to important policy settings in areas such as negative gearing and capital gains tax, which could have wider impacts for homeowners, mum and dad investors, and the rest of the economy.
Confidence is down, but fundamentals remain solid
The latest ANZ/Property Council Survey reveals that the Victorian property industry’s confidence levels have dropped, with a change of 15 index points to 126 for the December 2018 quarter.
Forward work and staffing level expectations have also reduced, in line with the overall surveyed sentiment for Victoria. Furthermore, expectations for price growth in the residential sector have eased, moving from -11.0 index points to -33.5 for the December 2018 quarter.
That said, fundamentals in Victoria remain solid.
ABS figures from November 2018 estimate that Victoria’s 6.3 million-strong population will pass 8 million by 2027. Most of Victoria’s growth is expected to occur in Greater Melbourne, with the area to go from 4.8 million to between 5.9 and 6.2 million in 2027. As a share of Victoria’s population, Greater Melbourne will increase from 77 per cent today to 79 per cent in 2027 and reach up to 85 per cent in per cent in 2066.
CommSec’s State of the States report places Victoria in top spot nationally for economic growth, retail trade, unemployment, and construction work done. Deloitte Access Economics December Quarter 2018 Business Outlook predicts Victoria’s growth to continue for the next two years. There’s plenty to celebrate in Victoria, and policymakers should leverage our strong position.
The outlook for 2019? If anyone could predict the future, they’d be worth a lot of money. The truth is, we don’t know for sure. What we do know is that decisions to invest are made based on certainty and confidence, both in relation to economic factors and the policy and regulatory landscape. It’s imperative that all tiers of government partner with industry to meet the challenges of the year ahead and to ensure benefits to all Victorians and the economy are maximised.
Who are we?
The Property Council is the leading advocate for Australia’s property industry — the economy’s largest sector and employer.
In Victoria, the property industry contributes $45.1 billion to Gross State Product (12.4 per cent), employs more than 331,000 people and supports more than 400,000 workers in related fields. It pays more than $21 billion in total wages and salaries per year, employs one in four of the state’s workers either directly or indirectly, and accounts for 57.5 per cent of Victorian tax revenue.
In Victoria, the Property Council members comprise of architects, urban designers, town planners, builders, investors and developers. These members conceive of, invest in, design, build, and manage the places that matter most — our homes, shopping centres, office buildings, education, research and health precincts, and tourism and hospitality venues.
Benefits of membership
The main benefits of membership are the opportunities to work with our members to:
- contribute to our impactful advocacy agenda including city shaping, investment, infrastructure planning, funding, and financing new asset classes such as Build-to-Rent, commercial spaces, and urban renewal. Our members add depth to our discussions with government, providing more voices behind us to bring strength and relevance to current issues;
- promote and grow your own company talent through our many networking, professional development, diversity, and mentoring programs; and
- expand relationships with other members and stakeholders who are also contributing to the strength of the industry and/or with whom you partner from time to time on projects.
Membership of the Property Council is offered on a state by state basis and enables all employees to have access to our services and receive subsidised rates to attend various networking and professional development forums, including Academy courses, within the state of membership. Membership provides an opportunity to participate in our events program, which is dedicated to supporting participants with networking and briefings to promote individual skills and connection opportunities.