This year’s Queensland Property Conference featured an exciting and informative program put together by the tireless Conference Steering Committee to benefit all areas of the property industry.
In keynotes and parallel sessions specifically tailored to different sectors, speakers addressed topics such as economics, foreign investment, affordability and lending, tourism, legal issues, planning, building innovation and business tools.
Veteran TV presenter Andrew Daddo opened the conference as MC for the two-day event, delighted that not all property workers were like the valuer character in celebrated Aussie film, The Castle. After sharing anecdotes from his time on Ten’s I’m a celebrity, get me out of here and Seven’s The Great Outdoors, he welcomed API President Tyrone Hodge to the stage for the opening address.
Mr Hodge welcomed all attendees to the conference and shared important updates from the Institute since the recent Extraordinary General Meeting when it was voted by the members for the API to become a company limited by guarantee, with a new National Constitution.
These changes, in addition to the new national structure and governance of the API and its new ‘members first’ policy, are anticipated to lead to better service and attract greater diversity of property workers seeking API membership. Mr Hodge said changes are expected to become more obvious next year at a local level.
“With these changes and continuous growth and review, we show the industry that the API does walk the walk,” he said.
Economic updates and risk
Next was the annual economic update presented by Gareth Aird, senior economist with the Commonwealth Bank of Australia (CBA). Mr Aird shared summaries of all advanced economies, including the UK, China, Japan, New Zealand, Canada, the US and the Eurozone.
On the whole, Mr Aird noted that commodity prices remain under pressure on the supply/demand balance, and that China in particular should be rebalancing away from investment-led growth towards a consumption model as industrial production growth has slowed. Closer to home, Mr Aird said Australia is experiencing its 24th year of uninterrupted growth, though this year’s growth is running below trend and will continue to slow, despite relatively strong household spend, net exports and investment in business and dwellings.
He said commodities had fallen sharply, affecting the current terms of trade, but resource exports should continue to lift, along with tourism. The end of the mining capex boom had also affected regional Australia, with falling property prices and more unemployment. Looking forward, Mr Aird said he anticipated Australian GDP growth of 2.7% in the 2015-2016 period, as more growth in residential construction and house price also lifts confidence of homeowners. Despite this, consumer sentiment was below key levels, and concerns over job security remain elevated.
There is a current need to boost non-mining capital stock, said Mr Aird, despite low interest rates, a low AUD and general positive business growth. The CBA anticipates low inflation continuing in the next few years, and subsequently that the RBA will leave interest rates at around 2%.
Following on from Mr Aird, and some tasty morning tea muffins, was a presentation on risk and the property sector, presented by Malcolm Edey, assistant governor of financial system for the Reserve Bank of Australia.
Mr Edey began with a similar outline of the Australian economic environment before discussing financial and economic development more broadly. A key question he posed to the audience around the global financial crisis (GFC) was why the recovery has been so drawn out.
He explained that though much of the focus is on the crash of Lehman Brothers in the US, the recession in the US was actually seeing progress by the time the flow-on effects to the Eurozone started bubbling over, with the euro-currency under threat and numerous bailouts for the Greek economy leading to a lot of risk pricing, low confidence and exchange rate issues.
The recovery from a global financial crisis will always take longer than other events related to the business cycle, said Mr Edey, with a global average of around 4-7 years impact from events in the past 100 years, meaning more risk management has to be brought into play, despite Australian banks and businesses having limited exposure to related global risk. Each individual trade partner’s experience with the GFC and other events will need to be taken into account when doing business with these regions, said Mr Edey, who noted many current risks would likely be short term and trade related.
With regards to property in particular, he noted that commercial property was a common source of instability in Australia, with a decline in yields and a rise in vacancy rates.
The changing face of tourism
Last before lunch was Daniel Gschwind, CEO of the Queensland Tourism Industry Council, to discuss the evolving tourism industry. He described tourism as a sometimes unappreciated backbone of the Queensland economy, now facing more renewed activity after a prolonged period of a strong AUD.
Mr Gschwind said that research found tourism was an industry that has had a largely positive effect on people’s lives, and was in the top five export categories for 83% of countries. Though the government often perceived tourism as flighty and immeasurable, Mr Gschwind said it was actually far less likely to fluctuate than resources, and follows a similar path to construction, which can often also depend on the strength of tourism.
He also noted the economic benefits of tourism are often downplayed and not realised to be a direct result of the industry, which can cause a particular region to thrive if successful, while also provided a strong capacity for employment opportunities.
The audience learned that tourism was Queensland’s second largest employer of its four leading industries, while contributing $23 billion to Queensland's GDP (7.9%). The added benefit was the ongoing protection of our natural and cultural heritage sites, which have led Australia to officially be the top destination for world class beauty and natural environments.
Deloitte Economics calculated the global opportunity for the tourism sector was high, with a strong advantage in Australia, and an outlook of 7% annual growth for outbound tourism annually in the APAC region.
The key challenges holding back further growth, according to Mr Gschwind, included a lack of confidence within the industry to take on new plans and developments. He also noted growing competition in tourism investment from developing countries, and Queensland in particular struggles to compete on financing, with a need to cut costs and red tape, and potential for policy changes around planning and infrastructure, among other things.
Effect of APRA investment lending cap
Conference delegates were treated to a buffet lunch while enjoying some down time and networking in the foyer and outside in the Gold Coast sun. Many also used the time to speak with some event sponsors about potential future dealings.
Following the lunch break, Domain’s senior economist, Dr Andrew Wilson, discussed the effects of APRA’s recent changes to residential mortgage lending practices, with the message being it has been an ineffective blanket cap applied nationally to lower prudential risk in the housing market, despite being only in response to Sydney’s hot property market.
With the Sydney-centric policy-making, Dr Wilson noted that there has in fact been a drop in lending to investors since June/July, however this has mostly been evident in smaller markets with already under-performing economies and housing markets, while NSW and Victoria were the least impacted.
Dr Wilson argued that a Sydney-only policy was needed, not least because half of investors buying property in Australia were located in Sydney, while NSW still has the largest loans-to-investor portion of Australia, which is consistent with 15-year averages. Dr Wilson also argued that the current market model of income versus house price was flawed, as it only factors who is asset heavy and income poor.
Any increase in rates would likely make little difference, said Dr Wilson, as investors and landlords would simply pass on additional fees to renters, further quelling the ability of younger first home buyers from saving enough to enter the market. As a result, residential investment will start to look like commercial, with a focus on yields and longer leases.
“Australia is only going to see more and more investors – investor lending is the new black – so the industry needs to learn how best to cater to that,” he said.
DHA opportunities and expert witness work
Following this, Defence Housing Australia’s Trevor Thomson (sales development and partnerships manager) shared the facts and figures around DHA as one of the largest property managers with approximately 18,000 properties Australia-wide, worth $10 billion in total.
Thomson discussed DHA’s property investment program, in which investors can purchase a property that serves as a rental home for defence workers. This investment also provides many perks to the property owner, including routine property care such as regular inspections, property protection services in the event of emergencies, while DHA also manages tenants, property maintenance and lease-end restorations, and even continuing to provide rental payments to the owner even when vacant.
Thomson said DHA also carries out an annual market review with a licensed registered valuer to ensure rental floor is maintained, while property management fees average around 6.5% compared to national average of 18%, according to a BIS Shrapnel service fees comparison. The majority of DHA properties are currently in NSW with approximately 4000, with around 1000-2000 in most states, and a couple with just a few hundred.
Thomson said the development pipeline for DHA was expanding, with the company currently spending around $3 million on new investments in partnership with external developers.
Following Thomson was His Honour Wayne Cochrane, Member of the Land Court of Queensland, to share “the view from the bench” on expert witness reports from valuers and other property professions. This presentation covered participation in conclaves, preparation of reports for court, conduct in the witness box as well as identifying cases that have discussed the admissibility or otherwise of expert evidence.
Mr Cochrane’s key messages included the necessity for all expert witness reports to be certain, any doubt or lack of expertise was to be noted honestly and outright, and nor was opinion acceptable if influenced in any way. Experts should “never assume the role of an advocate”, he added.
Experts should aim to only state facts, as well as any resources from which their opinion stems from, and make it clear if questions fall outside their expertise, said Mr Cochrane. In creating a report, experts must also note if they feel there insufficient research or data to comment on a particular area.
He also noted that at times when an expert witness is called upon, it needs to be considered by courts and valuers whether third party comments from an expert were really necessary, or whether common sense could prevail. Mr Cochrane said he believes all experts should give consideration to opposing views and all relevant circumstances, as decisions must always reflect professionalism and integrity.
“At the end of the day, an expert witness testimonial is only an opinion,” he said.
Building innovation and the Gala Dinner
To wrap up the day, Caitlin Shields – senior 5D quantity surveyor, Mitchell Brandtman, and Paul Bidwell, deputy executive director, Master Builders Queensland discussed market directions and innovations in the housing sector.
Ms Shields noted that 5D estimation and technology created cost certainty in volatile times, and understanding construction costs and housing trends is important knowledge for property professionals in the residential property sector. Mr Bidwell provided an update on construction data within the sector, including approvals and commencements together with building and renovation innovations, and how the industry deals with these.
Two hours following the close of the first day, conference attendees donned their best cocktail wear and returned to the GCCEC for some free drinks, friendly banter and an a lavish gala dinner. Guests were treated to three delicious courses, wine and live music by local band, the Lamplights, as well as special guest, premier mind reader Anthony Laye who proved, rather hilariously, that we are not the only ones that know our own thoughts.
Love your sister & capital markets
Guests who attended day two of the conference were treated to the story of how far a brother will go to support his sister. Keynote speaker, Australian actor Samuel Johnson, detailed how he promised his sister Connie, who was stricken with terminal breast cancer, that he would unicycle around Australia and spread breast cancer awareness, as well as raise $1 million for cancer research.
The promise saw Mr Johnson unicycle to every capital city, conquering the lows of Lake Eyre and the heights of Mt Kosciuszko. Through desert heat and driving rain, Samuel and his trusty unicycle took his sister’s message to everyone who would listen through the Love Your Sister campaign.
Slightly intimidated to be following this heartfelt story, fund manager Simone Dalley AAPI still managed to impress with details of capital markets from an Australian and global perspective, including the challenges facing the sector and the strategies being used by fund managers to find opportunities in the current investment environment.
Ms Dalley also shared details of the performance of the LaSalle Australia Core Plus Fund (LACPF), which is an AUD$650 million unlisted diversified property fund with approximately 14 domestic wholesale investors. She noted there was currently a 50/50 split between core and non-core assets in Australia, and the aim was to strategically divest from non-core assets over time, though she also noted that a plateau of core returns was likely.
Capital markets should always seek to exploit the different property cycles, she said, which is a strong strategy but “not an exact science”, particularly as the variation across regions is so great. Australia is now entering the sixth year of the current business cycle, she said, with the average length of the last three cycles around eight years, but these saw stronger rates of expansion than the current cycle, so it’s anticipated to be longer.
She noted the timing was good for leasing and rental growth in the office space while demand in Sydney and Melbourne shows evidence of rebalancing. Retail has seen yield compression across all sub-sectors, however retail fundamentals and leasing remain mixed, with the positive generally outweighing the negative. Ms Dalley said capital was "the lifeblood of real estate", playing a major role in supply response and investor demand.
On the whole, Ms Dalley recommended investors should avoid high leveraged positions, sell weak assets early in overheating markets, choose investments that will continue to get boosts from secular shifts (rather than cyclical shifts), and focus on high quality assets, sticking to deeper tenant markets.
Planning for valuation and social media
In instances where there is no development approval in place, valuers often request town planning advice to assist with the valuation assessment. This session, presented by Steve Reynolds, business unit manager for Cardno HRP, looked at how planners consider ‘highest and best use’ assessments, providing both simple and complex case studies, including in relation to compensation claims decided by Land Court.
Mr Perkins detailed the service provided by planners, and the responsibility of valuers to then determine if that use is financially viable considering what is physically possible, what is appropriately justified, and what is legally permissible. In all cases a planner must advise the valuer around “the scheme”, the relevant date, injurious affection, enhancement, events that may occur after said date, comparable sites for sales evidence; providing advice to a “prudent purchaser” and of course, planning risk.
He also noted that there would be some changes expected with the release of a draft Planning Bill by the state government, though this should just be tweaks to content while “the main hardware will remain the same”. As a side note, Mr Perkins said he longed for a planning policy that could be applied at all regions instead of having to work off numerous region-specific plans.
Next delegates learned about how they could grow their personal or professional social media profile with a presentation by Peter Black, senior lecturer with QUT Law. Today social media can be utilised to generate business, recruit new staff, network, and promote your work and your company.
Platforms like Facebook, Twitter, Google+, LinkedIn and numerous others can lead to growth, so long as the users know the right tips and tricks to use them to their benefit, while being aware of the pitfalls and legal implications.
Mr Black noted there are currently 13 million Australians on Facebook, with the largest age segment being 25-34. Though Twitter seems to dwarf in comparison, with only 2.5 million Australian users, this is also an excellent business tool if utilised correctly, as many Twitter users are very influential figures.
The key risks, however, are focused around the immediacy of social media posting, which invites mistakes or controversy, while the interactive nature of many platforms means you cannot control the action of other users, leading to reputational risks.
Further, legal risks can include defamation of others, should your tweet or post discuss another person or company; you may accidentally breach privacy rights or copyright laws, or post offensive material without realising. These risks can be managed, said Mr Black, by familiarising yourself with the terms and conditions for each platform, and creating company policy for personal and professional use of social media accounts, with appropriate moderating and education programmes.
Mr Black said companies could, and should, try to mimic what other organisations are doing with their social media policies as “there’s no need to reinvent the wheel”.
Queensland globe and event close
The final speaker for the day was Neil Bray, Queensland’s Valuer-General, who discussed details of the very efficient Queensland Globe (QG) tool - an interactive online government platform that can be opened inside the Google Earth application. The tool was created in response to the 2011 floods, and founded on the principles of the open data initiative. Imagery and data is collated and made available in real time during certain events, providing up to date and highly visual data via imagery and mapping - much more useful than the traditional spreadsheet.
QG allows valuers, planners, developers and others to view and explore Queensland’s spatial data. Users can also download a cadastral SmartMap or purchase and download a current titles search. There is a Land Valuations Globe option, as well as a New Trade and Investment Globe, which feature alongside Globes on soils, mines, vegetation management, flood events and coal seam gas. Mr Bray also demonstrated how the home page provides access to tutorials on how to use Globe, as well as how to add content to the base map.
To wrap up the day, API Queensland President Bart Mead thanked everyone for attending, as well as all the speakers for their excellent insights, and guests were treated to another buffet lunch as the event officially came to a close for 2015.