2019 boom areas + Top commercial investments + Is Labor policy correct?

2019 boom areas + Top commercial investments + Is Labor policy correct?

Highlights from this week:

  • Don’t believe everything you read
  • 2019 is NOT the year of the pig
  • Where commercial investment opportunities exist
  • Could Labor have it right?
  • For some, the great Australian dream is just that


Don’t believe everything you read – Simon Pressley

Kevin:   Well, you’d probably be excused for thinking that we’re in a dire situation with our property, when we continually see headlines as we’ve seen recently about the worst performing market since the GFC, and so on.

Kevin:   However, we’ll try and get a bit of balance into this conversation. Joining with me to do that is Simon Pressley. He’s from Propertyology. Simon, thanks again for your time, and-

Simon:   My pleasure.

Kevin:   Yeah, welcome to the show. You’ve predicted, in a recent release, that we could be in for some boom conditions. Five capital cities, and a number of major regional locations on track for some solid property price growth in 2019. There’d have to be some riders with this, though, wouldn’t there?

Simon:   There are. Well, one major rider, and that is … certainly …. 2019 there will be booms throughout Australia. They won’t be in any of our capital cities, but there will be booms in parts of regional Australia, regardless.

Simon:   However, some of the capital cities have underlying fundamentals that are conducive of a boom in future years, with the rider being, credit needs to return to being sensible again.

Kevin:   This is to do with a lot of the macroprudential controls that we’ve seen applied to the market, and what’s that done to confidence?

Simon:   eah, absolutely. I mean, look, I don’t think there’s an analyst anywhere in Australia, including Propertyology, Kevin, that this time last year said Sydney would decline by 10%, and Melbourne would decline by seven. None of us anticipated that. I think a majority of us said that those two markets were entering a downturn, but probably expected downturn to mean zero growth, or maybe they’ll lose 1% or 2%.

Simon:   We believe the gross overreaction by APRA in 2018 directly contributed to between 5% and 7% off property prices nationally. So the 10% decline that Sydney saw in 2018 probably would have been around 3%, if not for it being hard for people to borrow money. The 10% growth that Hobart had would have been in the mid- to high teens, if not for the APRA …

Simon:   Because credit affects everybody. We all want to buy, whether it’s a family home, or first home buyer or investor or whatever, but we need funding to be able to do that.

Kevin:   Yeah. It’s a bit like having a sledgehammer to drive in a pin.

Simon:   Yeah.

Kevin:   And you can see what happens, with those sorts of controls. You’ve done an interesting exercise, just to keep this in perspective now, where you’ve looked at three different scenarios and the possible impact on median prices in 2019. Just walk me through that one.

Simon:   Yeah. So why we’ve done this, and it’s not something that we do every year, the three different scenarios, because the availability of credit has such an impact, and it affects every market. Now we fully expect that sanity will prevail. But no one can tell us when will sanity prevail, and when a responsible adult wants to borrow money, that they’ll be able to get it, as well you should be able to do.

Simon:   That’s why we’ve done this, I guess, the three different scenarios. If there’s no change? If 2019, availability of credit is exactly as it was in 2018, we expect Sydney prices to decline by 7 and maybe up to another 10% this year. Same sort of declines in Darwin. That’s got problems of its own, Darwin, it’s officially in a recession, but we expect cities like Adelaide, Brisbane, Canberra, Perth, all to show growth of somewhere between 1% and 5%. And we expect Hobart will be, sort of, 4% to 7%.

Simon:   Now these are on the proviso there’s no change to credit policy. If, however, we get some relaxation and return to a sensible credit policy in the first quarter of 2019, you’d probably add a couple of percent to each of these cities. Maybe 2-3% extra growth in 2019, and if it returns to sensible credit in the second quarter of 2019, the price growth will be somewhere between Scenario One and Scenario Two.

Simon:   So, no one can tell us when sensible credit will return. But what we do know is, the RBA, the Federal Treasurer and some of Australia’s biggest economists, all over the last month have all publicly come out and said APRA have gone too far. It’s not just a property story. It’s an economic story. Economies require money to filter through the system, and that filter comes from what we earn and what we borrow.

Kevin:   What does a sensible scenario look like?

Simon:   A sensible scenario is if a responsible adult, who has a reliable income, and a history of paying their financial commitments on or before they’re due, and a good purpose for the loan. They should be approved. That’s what credit’s for. Whether we’re talking about a big infrastructure project or a publicly-listed company or government, right down to a teenager buying their first car.

Simon:   The biggest decisions that lives and … I’m sorry, individuals and corporations make, often require credit, and are often really good progressive decisions. So credit’s not a bad thing. It just needs to be used responsibly, which most people do, and those who don’t use it well, well, that’s why credit assessors have a job in banks.

Simon:   But certainly, we don’t have a record of irresponsible lending. I think what’s happened is, the Royal Commission has exposed some terrible stories, and some true stories, but that’s by no means the masses. The every day Ozzie, they haven’t had money just thrown at them that they shouldn’t have even [inaudible 00:06:00] our banks.

Simon:   We need to return to sensible lending.

Kevin:   Is there a scenario at all, where you see Sydney and Melbourne, our two biggest markets, showing any improvement in 2019?

Simon:   The improvement will be, I guess, the rate of decline that they had in 2018, compared to with ’19.

Kevin:   Okay.

Simon:   Now I have absolutely no doubt that Sydney and Melbourne property prices, and Darwin, will decline in 2019. But whether that’s just a couple of percent decline, or whether that’s closer to 10%, like they saw in 2018, will be determined by when APRA takes the clamps off.

Simon:   Now, actually some people in APRA are sort of suggesting it’s not them anymore, that it’s the banks. Look, I don’t know who to believe. But they got to stop the arm wrestle, need to bury the hatchet, and stop holding the country to ransom.

Kevin:   Your prediction is that if we get a return to sensible credit policy in the first quarter of 2019, Melbourne could look at anywhere from zero to negative 3% in its-

Simon:   Yeah. Which isn’t bad, really.

Kevin:   Which is not too bad at all. I mean, that would sort of give us some sort of equilibrium. But that action’s got to come fairly quickly in the new year.

Simon:   Yeah, and look, we do know that momentum has a big role to play in the property markets. Momentum in a boom period, for example, that fear of missing out mentality that buyers get when a market performs very strong for a long period of time. But, also, momentum has an adverse effect. If there’s a long period of time where people are negative reporting, people get miserable, and it can take quite a bit of convincing to get them positive again.

Simon:   This is why the likes of the RBA and our Federal Treasurer have come publicly in this last month and have said, “Banks and APRA, you gotta bury the hatchet, because you’re gonna cause some unnecessary inconvenience and harm to our economy.”

Simon:   Which, I need to stress, Australia’s economy and our underlying fundamental property markets have not been stronger since the onset of the GFC now 11 years ago. That’s really important for 25 million people to understand. The fundamentals have not been stronger for 10 years.

Kevin:   Yeah.

Simon:   Which-

Kevin:   We will talk about fundamentals in just a moment. The regional markets, let’s talk about those. We have seen, over the last couple of years, double digit growth in a number of those regional locations, largely from your reporting. Do you see that continuing in 2019?

Simon:   Yeah, absolutely, I do. But I think it’s going to be … What we’ve seen, I guess, in regional markets the last couple of years, it’s been New South Wales, Victoria and Tasmania that have performed really strong in their regions. I think, in 2019, more so Victoria and Tasmania. There will be some New South Wales markets that will perform strong.

Simon:   But Victoria and Tasi will especially stand out, but what we’re going to see in 2019 in the next few years is Queensland and Western Australia regions really start to pick up. It’s well known that they are Australia’s big resources states, and the resources industry has recovered very, very strongly over the last few years. But it will be 2019 that we’ll start to see that sharpening property market.

Simon:   You’re going to see, I’ll make a bold prediction now, that one of the most improved markets in all of Australia in 2019 will be Mackay, a market that has been in the doldrums for six or seven years. We think it’s going to have a really, really strong year in 2019, but for years ahead, there’ll be lots of locations, not just Mackay, that will really put their head up.

Kevin:   Okay. Well, let’s have a look at some of those, and not so much some of those, but maybe the fundamentals that are going to drive them to stick their head up. You’re famous, of course, for having nominated so early in the stage, what was going to happen in Hobart. What are the fundamentals that you track to pick on a potential boom in an area?

Simon:   Yeah, and look, it’s never, it’s a great question. It’s never one thing. It’s accumulation of things together that paint a picture. But markets that have been … Rule number one is, we don’t pick markets that are already booming or just recently had a really strong [inaudible 00:10:12] in Melbourne or Sydney. It starts with picking locations that haven’t done much for a period of time.

Simon:   Now just because they haven’t done much doesn’t mean they’re going to all of a sudden go. But it means it warrants some attention. Then what we look at is the current levels of housing supply.

Simon:   Often, when a market has been performing poorly for several years, the local construction industry are down in the dumps, and they haven’t been doing a lot of new homes. So you can have markets, and Mackay is one of dozens of examples, where supply is tight, even though at that point in time, property markets are flat.

Simon:   Then we need to look for housing affordability, because as confidence increases in a market, which is largely a byproduct of an economy improving, as confidence increases, those people who gain that confidence need to be able to afford to buy those properties.

Simon:   So, right throughout Australia, especially once we get outside of capital cities, most locations have a median house price of $450,000 or less. In some cases, down to the mid-200,000s. So those dwellings are affordable to all of their communities. It’s just a matter of whether those individual communities are in the frame of mind to transact in properties.

Simon:   When the economy starts to improve, they will take advantage of that improved confidence. If housing is also tight, then we start to see significant property price growth.

Kevin:   Well, I guess the choice is yours as to whether you go to join that list of people who look at doom and gloom, and follow all that reporting, or whether you’re going to look for the positive signs of where there might be some growth, and maybe make some wise investments in that way. Simon Pressley.

Simon:   Boom’s ahead, mate! Boom’s ahead, I promise you.

Kevin:   Good on you. Simon Pressley’s been my guest. Simon is from Propertyology. Thanks for your time, Simon.

Simon:   Thanks, Kevin.

2019 is NOT the year of the pig – Rich Harvey

Kevin:   2019, what is it? Well, it’s not the year of the pig or the cat or the dog, or anything like that. It is in fact the year of the home buyer according to Rich Harvey from the Real Estate Agents, Real Estate Buyers Association of Australia.

Kevin:   G’day, Rich. How are you doing?

Rich:   Very good, Kevin. Nice to be with you this year.

Kevin:   Yeah, indeed, mate. I’m looking forward to talking to you quite often during the year as well.

Rich:   Mmm.

Kevin:   So you’ve said this is the year of the home buyer. Tell me about that, and also, why do you think it’s going be a good year to buy a property?

Rich:   Oh, look, I definitely think the mood’s changed in the market. Investors have gone to ground because it’s just so much more difficult for them to get finance. So the volumes are way down on the investor market but I think it’s a year this year for home buyers to really shine. Prices have retracted significantly in both Melbourne and Sydney and in some other areas, so it’s actually giving first home buyers … it’s giving the downsizers and the upgraders a bit of a chance to have a sniff of getting into a market at a much better price, and particularly some suburbs that they previously couldn’t have afforded. So it’s really for those that have been sitting on their hands waiting for the market to drop a bit so they can get in. I think the first six months of this year is going to be prime time for them to take advantage of that opportunity.

Kevin:   Yeah. I sometimes wonder too if APRA realise they might have made a mistake by making it harder for investors to get into the market when they look at playing around with interest only loans. Interesting if they come back in or they become even more popular, Rich.

Rich:   Yeah, well, I think interest only loans has been … There’s a been repricing of those loans and it’s forced a lot of investors to go to P&I to get the cheaper rates

Rich:   But APRA went pretty hard in telling the banks to cut back their lending to investors and forced the banks to really tighten up the screws up on lending. So I think we will see the pendulum swing back the other way because if the investors stay out of the market for too long it will discourage housing supply, which will push up prices and push up rents over time.

Kevin:   It’s going to be an interesting year too particularly with a federal election on the landscape. What’s going to happen with interest rates? You think they’ll go up or down?

Rich:   Oh, look, I think interest rates will stay where they are and, if anything, will go down. But I don’t think they’re gonna move at all, to be honest with you. I mean, we’ve got a pretty strong economy in most states. New South Wales and Victoria are very, very strong states. I think we’re gonna see interest rates stay where they are.

Rich:   But the election certainly will add a bit of instability to people’s thinking. But in my mind, when there is that stability that’s the time to pounce on property-

Kevin:   It seems-

Rich:   … when others are sitting on their hands doing nothing.

Kevin:   Yeah. Really interesting to see too that some recent surveys have indicated that people aren’t as out of favour with negative gearing as what a lot of people might have thought. So it is going to be an interesting landscape this year.

Kevin:   Can we talk about upsize and downsize? Because there’s good opportunity in a softening market, which is really what we’ve got now.

Rich:   That’s right. Absolutely.

Rich:   Look, I think a lot of home buyers have been sitting on the fence waiting for the market to turn down a bit, thinking, “You know, I play sport with a couple of guys and they say, ‘Oh, look. Now, just the market needs to crash 50% and then I’ll buy.'” Well, that person will never end up buying.

Rich:   But it’s certainly an opportunity. So those that are considering upsizing, downsizing, or coming into the market for the first time … because if you’re selling your property, yes, you won’t get the highest price that you would have got a year ago. But what you potentially lose in that sales process you will more than make up for the buy process, the buy price, because you’ll be able to get a much deeper discount than you were able to previously, so …

Rich:   And the other thing is, those home buyers, you’re not rushing to exchange like you were during the boom. It was ridiculous. There’d be 10 bidders at auction and everyone fanning their numbers up in the air, and it would just be a fear of missing out. But when it’s a softer market there’s a lot less pressure, there’s more time to make a considered decision, and as buyers’ agents we’re getting a host of off-market opportunities, so all of our members are seeing a lot more opportunities out there.

Kevin:   Supply and demand—that’s what property’s all about.

Kevin:   We’re seeing a lot of population growth as well. That’s going to add to that demand for more property isn’t it? We need to build more.

Rich:   Well, absolutely. If we continue to go down this route of being a country that invites migrants to Australia … I think last year we had around 262,000 migrants coming. There’s been some talk of reducing the migrant intake, but we need a migrant intake because our natural population growth is not sufficient to sustain our economy. We’re an open-door country, we have a skilled migration programme, and the simple facts are we need to house people, and those numbers will continue and increase and put population … sorry … put pressure on dwelling demand.

Kevin:    We’ve mentioned already about the federal election. That’s probably going to be one of the biggest interesting things to follow this year. But we always see that market sentiment is adversely impacted by elections, isn’t it?

Rich:   It is, yeah. I mean, obviously Labor’s policy to remove negative gearing is at the forefront there. But there’s just a general sort of wonder about well, which party’s gonna get in and what are they gonna do the economy? Are they gonna improve it or stuff it up?

Rich:   And obviously if Labor does get in and remove negative gearing my prediction is there will actually be a little mini-boom on investment property, because people think, “Gosh, negative gearing’s gonna be removed. I better go and get an investment property for my future before I can not get the negative gearing benefit,” so I think that’ll be perhaps one side impact of it.

Rich:   The other impact is that it will also potentially adversely affect the demand for new properties, and where those new properties are being promoted may not be the best area to invest in. So my advice to any potential budding property investor out there: don’t buy new just because you get a tax break. Look at the fundamentals of the area that you’re buying in.

Kevin:   Yeah, really good advice.

Kevin:   And the other thing we find out too is that, you know, real buyers are out in the market no matter what the conditions are, no matter what the sentiment’s like.

Rich:   Correct.

Kevin:   We’ve all gotta have somewhere to live, so …

Rich:   That’s right. Look, I love buying in these times of uncertainty. During the GFC it was great. I bought about three properties that year, Kevin, so I’m getting cashed up again ready to buy in 2019 myself. So great opportunities.

Rich:   But I think that window … as I said about the beginning of our discussion … that window of when to that buy while the market’s going through this sort of fluctuation phase is going to be short lived. I think it’s a three- to six-month window in 2019, so I would say to buyers: don’t skimp on your research but don’t dilly-dally either. Don’t beat around the bush waiting for the perfect month to buy because it will pass you by, essentially.

Kevin:   Good advice from Rich Harvey, who is the president of the Real Estate Buyers Agents Association.

Kevin:   Rich, thank you so much for your time. I look forward to working with you during 2019.

Rich:   Thanks, Kevin. Hope you have a great year. Thank you.

Where commercial investment opportunities exist – Brad Beer

Kevin:   Well, with the residential property market cooling in different parts of Australia, many investors are considering commercial properties.

Kevin:   According to the 2018 Collier’s Office Markets Investment Review, approximately $18.96 billion in investment sales occurred nationally during 2017 and 2018, the financial year. That was a 46% increase on the previous financial year. Both sales volumes and transaction numbers increased, with 174 assets sold over 2017 and 2018, compared to 144 the previous year.

Kevin:   Now, if you are considering looking at commercial office building as an investment, you’re going to want to listen to this conversation that I had with Brad Beer. Brad is the Chief Executive Officer at BMT Tax Depreciation. Brad, thanks again for your time.

Brad:   Kevin, always enjoy coming along and-

Kevin:   Good on you.

Brad:   Having a chat.

Kevin:   Yeah. Well done, mate. Well, we’re talking about commercial, which we don’t do enough of, but it is a fascinating area for us to dig into. If we can talk about some of the growth areas and advantages of investing in commercial property, what are the areas that have experienced growth, and are becoming popular with investors, Brad?

Brad:   Well, you know, some of the data we look at is the piece there. Then we’ll talk some of the BMT numbers and what we see as well. But Sydney, Melbourne, Brisbane have been a bit more hot over the last little while for investors in commercial office space. A bit more demand than there has been in previous years, and I think the reason for that, partly around declining vacancy rates, obviously.

Brad:   National office rates were, or vacancy rates, the lowest in about five years, at about 9%. So Sydney offices 4.6, Melbourne’s 3.6%, so … That’s one of the big risks of commercial property is vacancy, I guess. When there’s a bit more vacancy, people get a bit more scared-

Kevin:   Yeah.

Brad:   Therefore we get lower vacancy, then, and don’t build too much stuff. Then people take it up, and less vacancy.

Kevin:   Well, I guess depreciation schedules are a good indicator about where the market’s heading, or the number of them. What have you seen? What does BMT Data show in terms of growth?

Brad:   Ah, we’ve seen some growth in commercial. We’ve always done nonresidential depreciation schedules in the 20 years I’ve been at BMT, but some people think we still only do residential ones-

Kevin:   Yeah.

Brad:   But so, we’ve been growing that over time. But some, the commercial … sorry, the commercial offices over the 18-19 year, second half of the year … Sorry, the first half of year-

Kevin:   Yeah.

Brad:   Is about 5% up. A lot of transactions on farms-

Kevin:   Oh, okay.

Brad:   We had a substantial increase, and, look, an 80-odd percent increase in agricultural properties from the same period in the … in second half of the previous year.

Kevin:   Are they classed as commercial, are they?

Brad:   Well, anything nonresidential-

Kevin:   Nonresidential, yeah.

Brad:   We sort of, we don’t class them as, obviously, offices.

Kevin:   No.

Brad:   But “nonresidential” to us, I suppose, is the term we use more regularly. A lot of increase in child care centres, which has obviously been an area, that, more child centres needed. So I see a bit of a shortage of those things going on. Industrial buildings, things like … we’re getting a bit more of the Amazon, the delivery stuff online-

Kevin:   Oh, yes.

Brad:   That’s required a bit more industrial type facilities, and we have seen a good increase in those. Then also Nursing Homes are another area, that we’re all getting older and we need more nusing homes.

Kevin:   I was going to ask you about that. I mean, that’s one of the big growth areas, isn’t it, aged care? I was going to ask whether you’re seeing an uptake in that.

Brad:   Well, the first six months of this financial year, 50% more of them we’ve done-

Kevin:   Wow.

Brad:   In depreciation schedules than the same period the last year, so-

Kevin:   That answered that question.

Brad:   Pretty solid increase.

Kevin:   Yeah, yeah.

Brad:   It wasn’t like … we still did plenty of them in the previous years. Look, that’s probably a higher growth in depreciation numbers. Then suddenly, they built 50% more, of course, but … maybe they’re learning and realising they need depreciation at the same time, which is always great for us.

Kevin:   Yeah. Well, what are the advantages of investing in a commercial property, Brad?

Brad:   Well, look I think, big thing is around, is often just around yield. Residential property yields in Australia are pretty light in most, especially capital cities, and yields are just higher. So that the cash flow requirement to fund or to maintain a commercial property of most sorts is generally a bit less. And it obviously comes with some risks and vacancies. And one of those big risk that just, really, yield is one of the things that seems to be the big push.

Kevin:   Are there many differences in how depreciation deductions are calculated? Say for residential property, or residential rental property, and non-residential property? Commercial property?

Brad:   Well, firstly, I guess, one of the other advantages is that often, the depreciation’s higher. Because there’s a lot of plant equipment, and things, and-

Kevin:   Yeah.

Brad:   The way that we’re calculating in the two areas, on the construction cost of the building, that we get a percentage each year of the Division 43 or capital works allowances. That actually, starts for buildings that are built since July ’82, instead of September ’87. So you actually get this deduction on a structure on a building that’s a bit older if it’s a nonresidential property. Some of those times, rather than being 2.5%, it’s 4% in those early years.

Brad:   Look, there’s potentially a slightly older building that can still get some better deductions. The other big thing is that the budget changes in 2017 that were made don’t affect a nonresidential property owner at all. So after that day, the secondhand plant and equipment items, you can still actually make deductions for and there’s also a bigger list of them. There’s less than 200 particular items in a residential house, but there’s about, there’s a list of about 6,000 assets that are, could be in a commercial premises or business.

Kevin:   Yeah.

Brad:   There’s just potentially some good deductions there.

Kevin:   Yeah, well, talking about commercial property, because there’s obviously a huge opportunity there, let’s look at fitouts, commercial fitouts. Sometimes they’re provided by the owners. Sometimes they’re set up by the tenant, in most cases, by the tenant. Can you explain how commercial fitout is claimed by a tenant of a commercial property, versus what the owner can claim?

Brad:   Yeah, look, the actual sort of claim is very similar in respect to, if you’ve got an item, you get to claim a deduction for it. But we often do … they’re a bit more complex in a commercial space.

Brad:   You’ve got the building itself, and the base of that building, and then the tenant, whoever that is, which is often different to the owner, makes deductions against all the things that they put in there. Now a lot of those things are loose, and they’re fitouts, and they’re plant and equipment. So the deductions can be quite substantial in those situations.

Brad:   Then sometimes, when you have to refit, sometimes, there’s opportunity to try and write those things off even a bit quicker if the accountant’s got some comfort over the level of requirement to fix them up at the end. So it’s a lot of deductions. All the money that gets spent in these expensive fitouts, sometimes, you want make sure that they get, it gets claimed.

Kevin:   Yeah. No, good advice. Yeah, okay, Brad. Thank you very much for your time. Once again, good to be able to clear up the fact that BMT do more than just residential depreciation schedules, as well-

Brad:   Yeah.

Kevin:   So there’s a lot involved in it, Brad. Thanks very much for your time.

Brad:   No worries. Great to be here as always. Thanks, Kevin.

Could Labor have it right? – Andrew Cairns

Kevin:   Well, with a Federal Election on the cards for this year, there is a lot of talk about what’s happening with Property Negative Gearing, making properties more affordable, but in particular, making properties more affordable for renters. I was interested to pick up on a release from the community sector banking organization about exactly that point, and supporting the Federal Labor oppositions announcement about what it was doing to do just that. Joining me to talk about it the Community Sector banking Chief Executive, Andrew Cairns. Andrew thanks very much for your time.

Andrew:   Thank you very much for the opportunity.

Kevin:   I want to talk about what we can do constructively to do this, and I know that your organization’s a supporter of what the Federal Labor Government are doing, or, Federal Labor Opposition are doing. How do you think that is going to help. There’s a lot of opposition to removing Negative Gearing?

Andrew:   I think that you’ve got to firstly have a look at some of the key drivers behind the issues, and then look at a more, a collective approach. So, as you know, in the last census, 114,000 people don’t know where they’re going to sleep tonight. In excess of 300,000 people looking for social or affordable housing, and that’s not even looking at the number of people who are experiencing lock-out from the rental market. Now, if we’re actually going to look at providing solutions to get a change in market, change in behaviour, and change in how we have a look at the solutions to provide opportunities for people to have access to housing, then there has to be multiple fronts.

Andrew:   One is … I went to a seminar where the person said, “Subsidised housing needs a subsidy.” So, I think we have to realise that in Australia, if we’re going to have an inclusive equitable society, then getting people to have access to safe and secure housing is a fundamental right.

Andrew:   Two, I think that people look at providing social and affordable housing as a cost to the country, whereas, I actually see it as an investment in having a more inclusive, equitable country. And it’s also an activity, which will improve the productivity, and the capability of people that will be in a position to actually have a house, and a home to call their own. Then can actually start to contribute to communities where they live and be able to be a more willing participant in societal outcomes. So I think … Sorry?

Kevin:   No, I was going … No, you keep going.

Andrew:   I think also, the opportunities that it needs to occur at multiple fronts. So one will be around taxation reform. How do we correctly start to create the opportunities to bring long term investment in the creation of new ecosystems and new players into the market? So we need to actually have a clear understanding of either the role of government, or the role of incentives to actually bring new investors, new participants into play. I think we also need to have a look at issues around planning as well. The sort of planning that we actually need, the regimes to combat Nimbyism, or Not in My Back Yard, to have better use of existing infrastructure, and better existing … sorry, use of existing access to jobs and transport, et cetera, as well.

Andrew:   So with regards to the announcement that was actually undertaken by the Labor Party, we’re very supportive of a long term strategy, and a long term commitment to addressing housing affordability within the Australian market, and it will require change. It will require change in taxation, subsidy, planning, and also commitment.

Kevin:   I’m reminded of what happened with the NRAS scheme, and how quickly that had to be dismant … well, sorry, not so much dismantled, but as a project, I know that a lot of people say that it did work, but I have a view that it didn’t work, and unfortunately you’ve only got to look at the value of the properties, and the difficulties in reselling those. And I’m just questioning on two fronts, whether or not having the private sector subsidise rents is the answer, or whether that is a government responsibility. And also penalising investors by removing Negative Gearing, certainly is not going to help add to the housing stock, Andrew.

Andrew:   Yeah. I think if you kind of deconstruct the argument to each individual point, then there’s obviously pro’s and cons to all. If I look at what the intent of what’s trying to be done, which is structural change to all players within the ecosystem, so I think that our housing affordability and rent affordability, because we can’t actually neglect that as well, both our housing and rent affordability issues which we have in Australia, have been created over a number of decades. So it’s going to take a long term commitment, and a number of changes to ensure that we can get on the other side of that hump in providing more rental affordability, and more housing affordability.

Andrew:   So I think that will require a mixture of changing, or commitment to policy. Commitment to subsidising to bring new entrants into the market, but they’ve got be long term understanding, commitment to tax reform, and to the commitment to that subsidisation. So, I think that it’s a mixture of a number of things which need to … and planning as well. It’s a mixture of a number of things which I think need to be brought to the table for discussion.

Kevin:   Who should be responsible for this? Is this a government responsibility that we as citizens of the country need to carry, or is this going to be solely on the back of investors, who are really out to look at building their own net worth?

Andrew:   Very interesting question, I’ve probably got a different answer to that. My experience is, it’s the strength of a village or a community is how that community or village includes those that are marginalised, or those that are in need. So I think it’s a mixture. I don’t think… The size of the problem is so large that government can’t just write a check itself and solve it. It’s so large that private enterprise can’t just write a check and solve it. Nor can we just rely on not for profit organisations to mobilise and leverage their cash flows and assets to actually create a solution.

Andrew:   I think what needs to change is, a more collaborative approach, a new ecosystem to create the development of capital into the solution. And the only way that can occur is some long term stability in being able to invest. So I think a ten year commitment provides some capability to create a new market, and that can mean, invite new participants, and new collaborations, and new ecosystems to actually get it done. It will be a mixture of government investment, it will be a mixture of private investment, institutional investments, superannuation organisation investments, [inaudible 00:07:57] for new capital, mums and dads, not-for-profits.

Andrew:   I think there’s just going to be a need to do things a little bit differently. If we’re going to turn the dial at scale, and that’s the issue, I think a lot of things have occurred which have created some great outcomes, but how do we do it to scale? And I think that one of the things that I learned when I had the opportunity to go to the US was, learning about their low income housing tax credit system which they’ve got over there. 30 year scheme which people can actually mobilise, private investment, and government and philanthropic activity in there to create outcomes. Because it’s long term, it’s known and it’s something which they can actually build a business model around.

Kevin:   I’ve been talking to Andrew. Andrew is the Community Sector Banking Chief Executive, Andrew Cairns. And the Community Sector Banking is the not-for-profit banking specialists of more than 15,000 organisations. It’s a joint venture between Bendigo Bank and Community 21 Consortium of not-for-profit organisations. Andrew thank you very much for giving your time. It is a complex issue, one that we certainly can’t solve in ten minutes, but it’s always interesting to get your insight, so thank you very much for your time.

Andrew:   You’re welcome. Thanks very much.

For some, the great Australian dream is just that – Nigel Napoli

Kevin:   Well, the great Australian dream is just that for many, many people. It’s something that we strive for. But for those who are handicapped or disabled it becomes even more difficult, even more important, and even more so if you’re young. We’ve seen the terrible situation where well over 6,000 young Australians with disability are forced to live in nursing homes. This breaks my heart, but it’s so good to see a company that’s now … Well, two companies who’ve gotten together. We’ll talk about that in a moment. PietyTHP formally announced their new partnership with Summer Housing. Now Summer Housing was established in 2007, and to tell us a little more about the association and more about Summer Housing I’m joined by Nigel Napoli who is the head of sales and marketing at PietyTHP. Nigel welcome to the show.

Nigel:   Thank you.

Kevin:   Nigel, this is as I’ve said, very near and dear to my heart. We’ve had some friends of ours who’ve been through this situation. I know just how important and distressing it can be. Tell me about Summer Housing and where it’s come from, what they do.

Nigel:   Sure, okay. Summer Housing is a housing provider that specialises, as you said previously, for a lot of younger Australians. What the whole goal is to provide housing where they can self care and find themselves a place where they can integrate with the local community.

Kevin:   Yeah. It’s very important. Because I said the only alternative for many of them, thousands of them, in fact has been to go into retirement villages where they’re mixing with 70, 80, and even 90-year-old people, which is not a good environment for young people in their 20s and 30s.

Nigel:   That’s absolutely correct.

Kevin:   Summer Housing has been around for a while. You’ve now partnered with them. You are a construction company, and you’ve put together a special project which is called View. Whereabouts is it? And tell me about it.

Nigel:   Sure. Views is one of our projects under construction in Rockdale. The development’s about 500 metres from the main shopping centre in Rockdale and about the same distance to both Banksia and Rockdale’s station, so it’s really, really well located. When we started working with the Summer Housing organisation, the focus was to identify 10 apartments that we thought were fit for purpose, so we did that. The arrangement with them is the 10 apartments plus the apartment controlled by the carer.

Kevin:   By the carer.

Nigel:   There’s an on-site carer, yep. So all the apartments are interconnected.

Kevin:   Yeah. But these are all brand new. You built them?

Nigel:   Absolutely. Absolutely.

Kevin:   Yeah.

Nigel:   We purpose-built them. The idea about the construction of it was so that it had longevity. It was very important to deal with this generation of occupant, but then as time goes on, if any variation is needed or it had to be refitted for another purpose for another person moving forward, that it had that adaption capability.

Kevin:   Who will be the owners of these 10 apartments? How does the ownership work?

Nigel:   Okay. The ownership structure is with the Summer Housing. The relationship is with NRAS, so it’s a national scheme designed by the government. It’s a National Disability Insurance Scheme.

Kevin:   Well, by my reckoning, you’ve done 10. You probably got about another 6,000-odd to do. What’s the timeframe, Nigel? I mean, are you looking at doing more of these?

Nigel:   We are. We are. This was a really good opportunity for us, because the relationship was struck up at the right time. It allowed us to integrate the changes with our construction programme. And to be honest with you, we were really glad to do it, because we’re all about diversity. A lot of our projects, we try and aim them at being family friendly. As far as we’re concerned, this is just all part of the fabric of the community.

Kevin:   Yeah. Well, I’ve had a look at the website. They’re beautifully designed, and they’ve got to, obviously, cater for people with special needs. These have been designed to meet the requirements under the NDIS, and they have things like ceiling hoists. And they look very, very nice, Nigel. Congratulations to you and your company. I think this is a classic example of developers giving back, and we totally support what you are doing with Summer Housing and congratulate you on that initiative. Well done.

Nigel:   Thank you very much. We appreciate that.

Kevin:   Yeah. Okay. Go to it. Have a look at it. Just look for the website View, V-I-E-W, Rockdale, R-O-C-K-D-A-L-E, that’s one word, viewrockdale.com.au. Nigel, thanks for your time. We’ll talk to you again soon.

Nigel:   Terrific. Thanks again.

Kevin Turner
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