Marshall White Projects Newsletter Edition 12

Projects Review Edition 12. 2017

Making Sense of 2017 Planning Reform

Creating a Point of Difference in a Crowded Market Place

Proposed “Fairer” Deal for Tenants— Unfair for Landlords

Rob Mills Architecture & Interiors

Design Beyond Trends

Current Challenges in the Building Industry

Funding Market for Residential Developers

Contents

Projects

1 Finishing What We Started

3 3 4 4 4 5 5 5

2 Spotlight 6 Making Sense of 2017 Planning Reform 8 C reating a Point of Difference in a Crowded Market Place 10 Proposed "Fairer" Deal for Tenants Unfair for Landlords 14 Rob Mills Architecture & Interiors 16 Design Beyond Trends 18 Current Challenges in the Building Industry 20 Funding Market for Residential Developers

Form Pelham Balmoral Helm 232 Viola Royal Ascot Adderley

Notes from the Directors Finishing What We Started There are five simple truisms in the world of Project Marketing, namely; 1.

The better apartments sell first (typically ground and top floor)

2.

The remaining stock will have longer days on market if you don’t continue to evolve a marketing strategy (particularly if you have grown the prices)

Past Project Profiles 12 Garden Square 12 The Davis 13 Oakdon 13 Timeless

3.

An overpriced development will still sell a few, but not enough to reach financial close

4.

The cost of rebranding and relaunching to start over is not just changing a few words on the internet, rather the additional investment of hundreds of thousands of dollars, particularly when you add in lost opportunity cost

Contributors 5.

6 Making Sense of 2017 Planning Reform - Kellie Burns, SJB (PH) 03 8648 3500 8 Creating a Point of Difference in a Crowded Market Place - Matthew Mackenzie, Creative Director of Seesaw (PH) 03 9329 8409 10 Proposed "Fairer" Deal for Tenants - Unfair for Landlords - Marshall White Property Management (PH) 03 9832 1193 14 Rob Mills Architecture & Interiors - Rob Mills, Director of Rob Mills Architecture & Interiors (PH) 03 9525 2406 16 Design Beyond Trends - Henry Francis from Henry Francis Design (PH) 03 9486 0012 18 Current challenges in the Building Industry - Anthony Lijovic, Director of Bayside Construct (PH) 03 9646 5373 20 Funding Market for Residential Developers - Matthew Liston, Director of Alceon (PH) 03 9975 4142

It’s hard work to create a marketing point of difference when all buildings, locations and offerings look the same to a buyer

So how is it done, particularly around growth corridors where there is an abundance of competition?

It’s often the case that if a buyer can’t discern between one development and another they’ll make a decision based on price alone. If your development falls into this category, then you're in trouble as you’ll often get low ball offers and general indifference from the discerning buying public when it comes to justifying your price.

This results in increasing days on marketing and multiple stages of expensive media launches.

Another common misnomer is the notion of just selling sufficient stock to trigger a construction loan and the moving through the balance of stock during the construction period – the reality is that if you’ve moved through 70% of total sales by way of volume within a six to eight week period, on average 16% of all stock will still be unsold past your 18 month plus construction period. You must focus on selling all you need to sell BEFORE you start digging, as your typical owner occupier thinks (often incorrectly) that the opportunity

for stamp duty savings as well as the chance to add variations and upgrades has now passed them by- so they will wait for the next shiny new development.

The very last thing you want is the majority of your forecast profit tied up in completed product, if you're not retaining this finished product for investment purposes.

Again, so how is it done...?

Firstly you need a project marketing company that looks at your development every day and only sells projects each and every day – we start the day here at Marshall White Projects with 'How do we move this project towards a sell out?' Including; 1.

Review what products sold and what hasn’t resonated with the market place?

2.

Can we recut the remaining stock to better accord with the market?

3.

Are we reaching the target market – has the branding and marketing brought the correct buying groups to the table?

4.

Do we have the right incentives (if any) that are relevant to the target market?

5.

When and where can we grow the prices to maximise the GR without increasing days on market?

6.

What’s the correct theme for an EDM out to our residential and off-the-plan database?

7.

When do we introduce referral partners (if at all)?

8.

Repeat each day

Our repeat business and referrals have come as a result of Marshall White Projects selling the last one within every development – not just the first one.

It has been an underlying fundamental, that has allowed our business to grow by 82% each year since our inception in 2013.

Call us now to discuss your latest development.

Cover Photo: Adderley 185 Rosslyn Street West Melbourne

Every effort is made to provide accurate and complete information in Marshall White’s (trading as Marshall White Projects) technical and regulatory newsletters. However, Marshall White cannot guarantee that there will be no errors. Marshall White and its contributors to the newsletter make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the contents of the newsletters and expressly disclaims liability for errors and omissions in the contents of this newsletters. Neither does Marshall White and its contributors to the newsletter assume any legal liability for any direct, indirect or any other loss or damage of any kind for the accuracy, completeness, or usefulness of any information, product, or process disclosed herein, and do not represent that use of such information, product, or process would not infringe on privately owned rights.

+ 61 3 9822 9999 1111 High Street, Armadale VIC 3143

Mark Dayman Director

Leonard Teplin Director

T: 03 9832 1193 M: 0409 342 462 mark.dayman@marshallwhite.com.au

T: 03 9832 1191 M: 0402 431 657 leonard.teplin@marshallwhite.com.au

Disclaimer: Information provided is believed to be accurate as at the date of printing, no responsibility is taken for any errors or omissions.

It is your responsibility to obtain independent, professional advice.

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Spotlight

Lawrence Yan

Ranko Cvjeticanin

Ross Hams

Lawrence is a talented communicator.

Fluent in Mandarin, Cantonese and Malay, his personal enthusiasm for property investment motivates Lawrence to help his clients find suitable investment property, appropriate to each individual need.

With over twenty years of real estate experience, Ranko has a proven track record of achieving outstanding sales results in the industry. During this time period, Ranko has seen substantial change in the real estate profession but his professional approach to every facet of every transaction hasn’t wavered.

A new breed of real estate agent, his intellect, market knowledge, passion and dedication impresses both new and existing clients who are rewarded with his uncanny ability to consistently negotiate hundreds of sales a year whether on or off market with local and international clientele.

With a bachelor’s degree in mechanical engineering and after years of experience overseeing the provision of mechanical building services for the construction of high-rise towers and mega-malls, Lawrence now directs his skills to offthe-plan residential project marketing.

Alongside his intention to assure hassle-free transactions for his clients, Lawrence’s willingness to listen makes doing business with him a pleasure.

Lawrence is a keen weekend golfer.

Married with two sons, he loves taking the family to the movies or going for an invigorating swim.

Part of the project development team at Marshall White, Ranko’s natural positive energy and enthusiasm and ability to relate to people from all walks of life has been invaluable. His genuine integrity and personal service style quickly makes clients feel at ease.

Balance has always been and continues to be crucial to Ranko’s consistency throughout his career.

Away from the office he spends time with his son and family and he is dedicated to keeping fit and physically active.

Form 21 Riversdale Road Hawthorn

Specialising in projects throughout Melbourne, each year he successfully sells in excess of $100 million worth of property. Ross has managed the sales campaigns for some of Australia’s most successful residential apartment and townhouse developers.

Displaying an intimate understanding of consumer trends, Ross utilises this knowledge advising clients on how to create a superior product to suit the ever changing buyer demands.

In his spare time, Ross enjoys spending time down the coast with his wife Jo and three kids, and supporting his beloved Cleveland Cavaliers and Melbourne United.

Pelham 54 Wattletree Road Armadale

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Current Projects Balmoral

Royal Ascot

Adderley

1571 - 1573 Malvern Road Glen Iris

2 Mascoma Street Ascot Vale

185 Rosslyn Street, West Melbourne

Helm 1 Cook Street Hawthorn

Bloom 1240 Glen Huntly Road Carnegie

232 232 Wattletree Road Malvern

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Making Sense of 2017 Planning Reform 2017 was a challenging year in the development industry, not least due to the roll out of two key reforms that affect residential development in Melbourne and Victoria more generally.

Reform 1 – Residential Zone Review The new residential zones introduced by the State Government in 2014 underwent further review in 2017, via Amendment VC110, to all planning schemes in Victoria.

The zone reforms have introduced key changes to the General Residential and Neighbourhood Residential zones, with the net effect being to place mandatory limitations on building heights (metres and storeys) and building footprints by requiring new developments to include ‘garden areas’ on sites.

The intention of the changes has been to ensure a consistent statewide approach to residential development and to improve housing diversity and choice across all Council areas, while protecting the open garden character of ‘more sensitive’ residential areas.

Councils can vary the state-wide controls under schedules to the zones, so while the ‘default’ height controls under the General Residential zone are 11 metres and 3 storeys, there can be areaspecific variations that need to be checked each time a site is reviewed for its development capability. Other planning controls also need to be factored in to site assessments as there can be a significant disconnect between multiple height / built form controls affecting sites.

The garden area controls are dependent on lot size, with areas of between 25% and 35% to be set aside for open garden areas around proposed buildings. These controls relate to both development and subdivision applications.

These revised controls can be seen to be providing ‘certainty’ to planning processes for all involved. On the flip side, however, they have arguably taken away the flexibility that is needed for most urban residential projects to respond well to site opportunities and constraints, and to effectively contribute to ‘urban consolidation’.

They are leaving some landowners and developers scratching their heads at how inner urban sites accommodating existing five or six storey buildings and almost complete site coverage, could now have their redevelopment capacity limited to 3 storeys and 11 metres and with up to 35% of the site given over to open gardens areas.

There is allowance for a replacement building to match the height and number of storeys of adjoining developments, however, the garden area controls are to be imposed on all developments, including those that do not need planning permission (single dwellings), as well as subdivision applications.

Do these new Residential Zone controls apply to existing Planning Permits and Permit Applications?

There is much debate currently as to how far the ‘transitional provisions’ included in the General Residential and Neighbourhood Residential zones go towards protecting existing permits and applications from the retrospective application of these controls.

This is particularly important when amendments to permits and endorsed plans are needed to respond to engineering, building regulation and other ‘design development’ requirements and where a building’s height or footprint is varied because of these changes.

There are no VCAT decisions yet to clarify whether amendments to planning permits are fully covered by the control exemptions afforded by the somewhat ambiguous transitional provisions. The views of Councils on this matter vary widely and provide limited certainty regarding the likely approval of amendments to existing residential permits and plans.

Additionally, there are no ‘transitional provisions’ or control exemptions provided for subdivision applications for developments approved prior to VC110 (before the 27th of March 2017). This is resulting in confusion and difficulty for developers where the mandatory garden area controls are being imposed on subdivisions of approved developments not otherwise affected by the requirement. While it is an unintended consequence of this planning reform, it is proving challenging to overcome.

Reform 2 – Introduction of the Better Apartment Design Standards In addition, the Minister has introduced the Better Apartment Design Standards to all planning schemes as a detailed assessment tool for apartment developments (VC136). These have also raised the ‘bar’ for apartment design, ostensibly to improve the liveability of apartments across Victoria. While these standards are not mandatory, design teams will need to work creatively to justify variations to them.

Do the new Better Apartment Design Standards apply to existing Planning Permits and Permit Applications?

and Victoria, in many good ways. However, we are only starting to understand the physical impacts of the controls on sites and the legal impacts of the controls on existing permit applications and planning permits.

We look forward to contributing to the discussion and debate about what further reforms are needed to facilitate residential development throughout the state.

For further information please call Kellie Burns or Phil Borelli of SJB Planning on 03 8648 3500.

A DELWP link about Residential Zone reforms can be found here: https://www.planning.vic.gov.au/policy-and-strategy/planningreform/reformed-zones-for-victoria/reformed-residential-zones and about the Better Apartment Design Standards can be found here: https://www.planning.vic.gov.au/policy-and-strategy/ planning-reform/better-apartments

The ‘transitional provisions’ included in this planning scheme clause are clear, concise and easy to read. They exempt all applications and permits from these controls, if lodged or approved prior to the 13th of April 2017 start date.

Impacts on Existing Permit Applications and Permits While the new planning controls include ‘Transitional Provisions’ to exclude pre-existing projects from these new planning controls, there are many ‘teething issues’ and ‘unintended consequences’ arising from the interpretation of the controls.

The State Government’s residential reform agenda will change the residential development landscape throughout Melbourne

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Creating a Point of Difference in a Crowded Market Place

If you’re engaged in the property market, like us you’ve probably noticed an overwhelming sameness. Clichéd headlines, undistinguished renders and stock photos are everywhere. So how can new property stand out? At Seesaw, we’ve found it takes a strong team, a solid strategy and a trusting client to step outside standard comfort zones and create a campaign with real cut-through.

The result is not only a memorable project, but a stronger brand for the developer.

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We start every project with an open conversation. We undertake a deep dive with all stakeholders to understand the developer’s product, the agent’s sales strategy and the project’s budgets and time-frame. We are then in a position to formulate a considered brand and campaign strategy.

As with all projects at Seesaw, our strategy phase involves a collaborative workshop leading to the development of core values and a brand essence. This informs all subsequent creative thinking, ensuring both uniqueness and consistency. With property branding, our strategy is focused on three key factors.

1. Purpose: At the heart of every memorable brand is its purpose. Here we look at the project itself – from the physical components such as the architecture and interior design to the experience of the project partners. These are the elements which potential purchasers will most identify with the project itself – what it is, who is behind it, and how it will benefit their lives.

2. Place: Stepping back from the project, we next examine its context; the place. This is where we look at the marketable qualities of the location, from basics such as amenities and transport to more intangible elements such as community spirit and future potential. For owner-occupiers and investors alike, the right location is often as important as the product itself.

With a solid strategy now in place, we deploy the full talents of our studio to craft a brand and marketing campaign that will create a connection. We also ensure that our approach is scalable across multiple touchpoints (from lavish brochures to engaging digital ads) and will resonate with multiple demographics as the campaign evolves (from overseas channels to local markets).

While our creative strategies are project specific, at Seesaw we also take a long-view of our clients’ brands to build equity through recognition and trust. With a crafted and considered brand story in place, they can approach the market from a stronger position when it comes time for their next project.

At the end of the day, we’re only successful if our clients are successful. That’s why creativity isn’t enough. To truly elevate a project, only the right strategy will yield the best result.

3. People:

Matthew McKenzie

An effective campaign is one which speaks directly to its target audience. In this final area, we look at the people who will be engaged by the project, and we ask questions around what they are looking for and how this property will meet their needs. In other words, we want to ensure our brand responds to both statistics and psychology.

Creative Director PH 03 9329 8409 seesawstudio.com.au

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Proposed “Fairer” Deal for Tenants— Unfair for Landlords Proposed changes to the Tenancy Act by the Andrew’s state government are likely to discourage people from becoming landlords. The reforms which have been robustly criticised by the REIV and other industry bodies are heavily weighted in favour of tenants to the detriment of landlords.

The proposed changes will take away a landlord’s right to request the end of tenancy for “no specific reason” and will only allow rental increases once every 12 months instead of the current 6 months.

Landlords will not be able to have a blanket ban on pets either, or be able to refuse reasonable requests from tenants to make minor modifications to the rental property. Bonds will also be automatically released to tenants unless a dispute is lodged by the landlord within 14 days. A proposed public blacklist would be created to name and shame landlords who breach their responsibilities.

Rental prices would also need to be advertised as a single figure rather than a range, with landlords and agents banned from soliciting a higher price than was advertised. While there has been an increase in the number of Victorians renting a home,

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these reforms if introduced, are likely to tighten the rental market and cause a rise in rents as a consequence. Although there are always a handful of unscrupulous landlords who flout the rules, most landlords are in fact “mum and dad” investors who own a single investment property to fund their retirements. The broad nature of the reforms is likely to discourage future investment from this segment.

It is expected that the new legislation to be introduced in 2018 will be roundly opposed by a range of industry bodies and the Liberal opposition party.

Marshall White Property Management PH 03 9822 9999

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Past Project Profile

Past Project Profile

Garden Square 42-58 Nelson Street, Ringwood GARDENSQUARERINGWOOD.COM.AU

Average Price per m2

Apartment Type

% of Total

Average Size per m2

2 Bed, 1 Bath

39

71.8

$7,764

$557,118

3 Bed, 2 Bath

61

110.4

$7,288

$808,826

Average Price

Price Range $539,000 – $2,193,000

The Davis 1A Davis Avenue, Camberwell THEDAVIS.COM.AU

Price Range $2,215,000 - $2,385,000

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Oakdon

% of Total

Average Size per m2

1 Bed, 1 Bath

6

57.3

$10,281

$589,000

2 Bed, 2 Bath

68

80.2

$11,265

$905,024

3 Bed, 2 Bath

26

121.6

$11,572

$1,411,438

Timeless

Apartment Type

45 Orrong Road, Elsternwick MODA.COM.AU/TIMELESS

% of Total

Average Size per m2

2 Bed, 2 Bath

27

70.5

$10,798

$760,000

3 Bed, 2 Bath

45

124.5

$11,769

$1,468,000

3 Bed, 2 Bath + PR

18

168.4

$13,373

$2,125,000

3 Bed, 3 Bath + PR

9

160.7

$14,001

$2,250,000

Price Range $579,500 - $1,688,000

% of Total

Average Size per m2

Average Price per m2

4 Bed, 2 Bath + PR

33

273.0

$8,297

$2,265,000

4 Bed, 3 Bath

67

281.0

$8,184

$2,300,000

Apartment Type

Average Price

Average Price per m2

Apartment Type

2A Scott Grove, Glen Iris OAKDONGLENIRIS.COM.AU

Price Range $735,000 - $2,500,000

Average Price per m2

Average Price

Average Price

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Rob Mills Architecture & Interiors

Rob Mills Architecture & Interiors (RMA) is a globally recognised practice with a commitment to excellence and a robust record in the delivery of internationally awarded projects. RMA is the recipient of the WIN Interiors Practice of the Year and a finalist in this year’s WIN Architecture Practice of the year. Rob Mills and Marshall White spoke of what living well today really implies.

MW: How do you begin a new project with clients?

MW: Is there a definition for a luxurious life?

Rob Mills: The starting point is always understanding the location for the space we will create together. This is the land on which we build. Whether it’s in the city or on the coast or in a rural location, it’s the quality of the land which determines the quality of what we will build together. The quality of the light, the outlook and the place are the raw materials that will be expressed in what we later conceive.

Rob Mills: I think there is. And it’s not a definition which begins and ends with property or possessions. Luxury is no longer just about space, it’s about how space is planned and how the space functions. How space can heighten our senses and anticipate our sensual needs. Luxury is when we integrate the management of sound to eliminate the noise of daily existence, creating an oasis of enjoyment. It’s about harnessing natural light to assure vitality and well-being. This is luxury for life and for living well.

But before this, we need to know and understand our client and the life they have led. We believe that everyone shares a desire to live well. And for many of our clients there is an added dimension of wanting to live a luxurious life.

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MW: Is there a consistent question you are asked when a project begins?

Rob Mills: I don’t think so, very often there are no questions

but there is this desire - to create together – so rather than questioning, we need to speak at length to truly understand our clients' lives and the achievements and accomplishments which have brought them to this point and to us. The work we do creates a backdrop for the rich diversity of our clients' lives. They are fulfilling their aspirations and creating essential connections with their families and, importantly, creating something that will endure.

This is really what is important to people now.

deliver a complete sense of wellbeing to our clients. It’s not really about what is put into the space in the way of furniture – and it’s not just a matter of having an abundance of space.

MW: What do you hope to achieve in the design you develop for clients?

For further information contact Rob Mills Architecture & Interiors at: 1st Floor, 10 Grattan Street, Prahran VIC 3181 Ph. +61 3 9525 2406 contact@robmills.com.au

Rob Mills: First and foremost, we want to ensure that regardless of the nature of the assignment and the resulting build – that we

Not all spaces are created equal – the true measure of a space is really about its emotional dimension – how it makes you feel – not a superficial acknowledgement of recent design trends – but a deep, almost visceral emotional reaction and connection to space.

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Design Beyond Trends Our society is more visually aware than ever before.

We look at hundreds of images daily and quickly absorb what appeals to us.

We are all influenced by what we see and, when it comes to fashion or design, through continued high exposure, what started off appearing as wildly different or avant-garde, quickly becomes filtered to a point of general acceptability and we adopt, follow or are influenced by what becomes a trend.

Through the speed of today's technology, an emerging design feature, colour or trend, can quickly spread, mutate and be adopted globally. Within weeks of an international trade show or product launch we can now see design influences quickly embraced and adapted into fashion, interior design décor and homewares, with new colours and patterns appearing on everyday household items in a seasonal cycle.

Design is now embraced and valued by Australians more than ever before and the property market has played an important part, demanding new architectural & interior styles with strong visual themes that stand apart and keep pace with international trends, representing an ideal lifestyle for the intended demographic.

All aspects of design, architecture, interiors and graphic design are now integrated into a property development, with a key shape, colour, or texture often becoming a distinguishing feature or marketing touchstone.

Notably tactile textures, leather, imprecise stone and timber grain, less uniform marble in greens, warmer greys, bronze colours, industrial oxidised metal finishes and hand applied treatments are becoming more prevalent.

Designers are now exploring the colours of early modernism championed by architects such as Ponti and Corbusier, with blue, terracotta, brown, green, mustard and yellow emerging as a colour palette, shifting away from the current (exhausted) trend driven schemes of pastels and pinks in furnishings.

The last few years have seen the rise of simple geometry within

Universo Daybed, Design Henry Francis & Sonya Pletes.

furniture, directly referencing the early 1980's Italian Memphis period, promoting the circle, square and triangle. This style continues to be a very popular design source and parallel to this is a revival of post-modern shapes and classical motives, such as arches and grids, again last seen in the 80’s. The return of Terrazzo and Granite as popular cladding and surface materials for furniture, interiors and homewares illustrates this.

Trade shows such as Melbourne’s Denfair and the recent independent Sydney Design event, Design–Made, are two key design events for launching new products and promoting our furniture industry, helping accelerate the rise and acceptance of working with Australian furniture and product designers.

There is a strong movement towards simple monolithic forms in furniture, often using a single material. Designers are more than ever merging art with design, crossing over or merging disciplines to produce high-end limited edition gallery pieces, as furniture collectibles in a range of alluring metals, timbers and stone.

Furniture When it comes to interiors and in particular furniture choices, forecasting the future and keeping beyond or avoiding the curve of a trend is equally important.

Our furniture selection becomes the most immediate distinction of our ‘lifestyle’, instantly representing our personality, individuality, who we are, how we live and our aspirations.

The choices we make in selecting furniture and décor are therefore critical but historically have often been given secondary importance.

This is changing as the visual sophistication, confidence, awareness and access to design in our society increases.

Furniture Locally As we continue a gradual cultural curve towards an informed appreciation of design in Australia, there is clearly a growing appreciation of craftsmanship and a deeper respect for design and designers in the community.

The choice of quality modern furniture from local designers and smaller manufacturers across Australia has grown significantly over the last 10 years.

Australian designers have focused on smaller batch production and self distribution due to the specifics of our market, but with increasing success. This has been helped by web based promotion and e-commerce platforms.

In Australia there is certainly a renewed interest in local ‘makers’ and in furniture pieces that are generally very simple in form and leaning to more youthful, lighter modern Scandinavian influences.

Blond timbers, curved and profiled upholstery, visible connections and stitching often bridge the gap visually between residential and commercial furniture. This style is appealing and particularly suitable to a younger demographic of apartment and home owners.

There is certainly a new confidence and pride in Australian design.

Bespoke Furniture In our practice, I like to integrate custom furniture pieces and lighting into projects as often as possible. My background is in industrial design and architecture, so designing furniture for our interior work is an exciting challenge and it has become very important, as our pieces instantly impart an authenticity within a project.

By interpreting the client, project or brief through the design of our own furniture or product items, we arrive at something that is stylistically unique and genuinely appropriate for the space.

As a starting point for a design, we might reference a theme or an ideal, the profile of the client, the company, the environment around the site, or simply the things that we respond to, feel and love. Notably, we look to art, fashion, design and sculpture as rich sources of inspiration, providing a source of unlimited creative design potential.

Universo daybed

None of us work or live in a bubble, we are all influenced by what we see. In our society, trends are always apparent and cyclical, but never return in exactly the same manner. In design, interiors and architecture, themes emerge marking a distinct point in time, expressing a cultural, economic or political change or spring from exploiting a new technology.

As designers, how we unpack, understand, interpret, work with or reject a design trend can become our hallmark. Following a set of ideals or a strong theme positions the design or project we are working on within a meaningful intellectual and aesthetic framework.

We should always welcome new ways of visual expression, but not look to follow current trends in their own right.

Trends should be used as a rough guide at best.

When you combine the things that you enjoy and love into an interior, rather than follow what you think others would do, the result is personal and uplifting.

If we create, generate and follow our own inspiration, we arrive at designs that are unique, welcoming, soulful and to some extent, timeless.

Design beyond a trend.

We are also now actively working on a range of production furniture and accessories suitable for specifying in our own commercial, hospitality and residential projects.

Raw and rougher finishes are becoming more apparent, often celebrating the imperfection of natural materials within furniture and lighting pieces.

These designs allow us to re-enforce our signature aesthetic and generate a particular atmosphere unique to each space.

They allow us significant freedom and give each project its own true expression.

The Trenerry Property Office, shortlisted for the 2017 IDEA Awards, Workplace under 1000 sqm.

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Many Australian furniture, product designers and collectives are now creating a strong presence overseas and, in more frequency working with established international manufacturers.

Originally designed for an apartment entry lobby, The Universo daybed is notionally influenced by furniture from the 1960’s and 1970’s, but expresses its own distinct personality through proportion, form and materials. We design referencing the historical style of a period as the influence, rather than following an immediate or recognisable trend.

The Universo Daybed is a case in point. Designed by Henry Francis and Sonya Pletes, the Universo has its own distinct personality and distinguishes the space it sits in with our values: quality, elegance and sophistication.

For further information contact Henry Francis on PH 03 9486 0012 or visit: henryfrancisdesign.com

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Current Challenges in the Building Industry

Mint Apartments - Rouse Street, Port Melbourne. In collaboration with Wood Marsh Architecture.

Photo: Jake Nowakowski

Lansell Road, Toorak in collaboration with Carr Design Group. Shortlisted in the Apartment Category of the 2017 House Awards.

Photo: Sharyn Cairns

Development Feasibility

Case Study

At the project conception stage it is vital to understand how a proposed design scheme relates to market appeal along with the buildability sum to achieve a profitable outcome. By engaging the process of ECI (Early Contractor Input) this allows a feasibility for the project to achieve the best outcome. An experienced contractor with proven performance on successfully delivered projects will result in fixed development returns.

A recent accomplishment that has set our new benchmark is the Mint Apartments in Port Melbourne. With a unique design across the façade with its green tinted glass curtain wall and articulated concrete panelling draws appeal.

Project Tendering In the current buoyant construction industry, the successful builders have less of a challenge in competitive tendering.

Good rapport based on a long standing relationship with their subcontractors and suppliers provides opportunities to achieve successful project outcomes.

The project was won in a competitive tender. This followed a value management process consulting with stakeholders to ensure the quality and principle project requirements were adhered to.

Design and construction details were resolved efficiently with the novated consultants. One of the challenges faced during constructions was the programming of the works around weather conditions due to it’s close proximity to the bay. The project team did a tremendous job in mitigating any time lost which resulted in achieving the program milestones throughout the project. With a high expectation of quality, the team showed incredible diligence in resolving any detailing issues to ensure the program wasn’t being compromised.

The result speaks volumes with the prestigious awards for 2017 Victorian and National Medium Density. Mint Apartments was also recognised as the Best Multi-Unit Development over 12 units for the dual awards.

For further information please call Bayside Construct on 03 9646 5373 or email: info@baysideconstruct.com.au

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Funding Market for Residential Developers Matthew Liston from Alceon Group, an active non-bank lender to the residential development market has provided his view on the current funding market for residential developers and purchasers.

In late 2014 the Australian Prudential Regulation Authority (APRA) commenced tightening lending standards for the residential property market for both development funding and residential mortgages, particularly for investors.

As broadly reported non-bank lenders have responded to what initially appeared to be a short-term dislocation of the credit market. At Alceon we have experienced a significant increase in the senior lending component of our business. Over the past 12 to 18 months, in many cases we have worked alongside existing bank relationships to support good quality developers who are providing much needed supply to the market. Our focus has been to support the growth of our client’s business. After almost three years of tighter credit conditions, it now appears that the market dislocation may be prolonged. The expected requirement for interim shorter term senior debt, even if at a premium to traditional bank funding costs, has not dissipated. We now expect that these conditions will continue for the foreseeable future as fears (often unfounded) around longer term property values and interest rates persist.

For developers, these ‘macro-prudential’ measures were initially reflected by banks imposing increased credit underwriting standards; decreasing leverage, requiring higher levels of presales and reducing the acceptance of sales to foreign purchasers (FIRB).

In time the banks also imposed restrictions on lending to specific sub-markets, applied lending exposure limits to existing clients and declined to lend to new clients.

For the end-purchasers of completed apartments, it has been investors that have been primarily impacted by APRA’s measures to cool the residential property market. Again largely at APRA’s direction the banks have imposed higher credit standards; decreasing leverage, imposing increased loan serviceability tests and reducing exposure to specific sub-markets. Obviously there is an element of the bank’s own credit policies that have also been relevant and indeed appropriate at this time in the residential market cycle.

The RBA’s analysis of Shadow Banking in Australia released in October 2017, highlights that in the post-GFC investment environment whilst hedge funds are increasing lending levels, that other sources of non-bank lending has not expanded to the extent that was experienced pre-GFC and remains below or at similar levels to 2012. The limited increase in non-bank lending levels has led to the prolonged period of increased credit pricing for developers.

Household Sector

In October 2017 the RBA has also released an estimate of the share the residential housing credit provided by non-authorised Retail Sales Growth deposit taking Institutions (ADI’s). The RBA reports that%non-ADI’s % represent less than 4% of total housing credit. This current level Values* (year-ended) is well below the peak of just under 10% seen in 2006 and only 8 credit at 8similar levels to 2012. The low levels of non-ADI housing indicates that the recent increased investments of hedge funds and other alternative sources of capital have been focused on 4 4 lending to developers and has not significantly flowed through

Volumes to end purchasers.

It has been widely reported that hedge funds and other pools of capital from foreign investors have taken advantage of the ‘special situation’ created by APRA’s changed standards imposed on the banks. Whilst the share of the market represented by hedge funds has increased, analysis by the Reserve Bank of Australia (RBA) shows that as a percentage of non-bank lending,

(year-ended)

hedge fund investments are only approaching 2014-2015 levels.

Significantly the RBA analysis indicates that non-bank lending or “Shadow Banking in Australia” as a share of total financial assets remains below 7% of the total market and below levels observed as recently as 2012.

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20

Graph 3.12

Graph 3.13

Shadow Banking in Australia $b

Value

Share of financial system**

750

%

Year-average*

%

%

8

8

500

6

10

250

5

4

2

2

2005

2009

2013

Director, Alceon Disposable income PH 03 9975 4142

%

alceon.com.au Saving ratio

-5 2017

5 0 -5 *

1992

% 15

Total

0

-15

2007

2012

201

Average since 1980 = 100

index

20

15

16

2002

Consumer Sentiment* ’000

30

20

1997

Household sector includes unincorporated enterprises; disposable income is after tax and interest payments; income level smoothed with a two-quarter moving average between March quarter 2000 and March quarter 2002; saving ratio is net of depreciation Sources: ABS; RBA

Monthly %

Financial year Contributions to ’000 return on equity

16

100

-15

12 Claims ratio*

% 4

Matthew Liston

0

Graph 3.14

0 6

2001

Consumption

5

Percentage change over year to latest three months Source: ABS

30

15

0

Quarterly *

Real, year-ended growth

10

PrivateRatios Residential Building Approvals General Insurers’ Financial

Estimated Non-ADI Share of Housing Credit

Financial assets, by economic function*

%

Volumes

-5

Household Income and Consumption*

%

10

% 0

The levels of investment by non-bank lenders, when placed in the context of the recent pickup in Private Residential Dwelling Approvals, indicates that scope of further investment in the sector remains for hedge funds and other sources of capital and that pricing levels will likely remain high, at least in the short term. An increase in the level of investment by non-ADI’s would assist to convert the increased level of residential building approvals into successfully completed projects, however the slow pickup of investment in housing credit by non-banks suggests that securing presales may be challenging for developers.

70

8

60

4

12

% 70 Detached houses

8

60

4

85

Higher-density housing

0

2007

2012

2017

2007

2012

2017

Hedge funds*** Other funds investing in credit products Non-prudentially consolidated finance companies Securitisation vehicles (excluding self-securitisation)

* Total assets where financial assets data are unavailable ** Financial system excludes the RBA *** Hedge fund data are only available from June 2008 Sources: ABS; APRA; ASIC; Australian Fund Monitors; RBA

standards at prudentially regulated entities.

In line with the trends noted above, the available

0

0 *

2005

2009

2013

0 2017

2017 is year-to-date average Sources: APRA; RBA

could be reluctant to provide due to regulatory issues. Longer-term funding is typically through RMBS and while this market is recovering, RMBS pricing is still well above the cost of bank funding (deposits or senior unsecured bank debt).

50

2005 *

2009 Return on equity Underwriting result

0

19922013

1997

50 2002 2017

Source: ABS Investment income Tax and other

Ratio of net incurred claims to net premium; change in reporting basis after June 2010 Sources: APRA; RBA

to reverse earlier downward pressure on some commercial premiums. Despite higher natural disaster claims due to cyclones, earthquakes and hailstorms, the claims ratio (net incurred claims

2007

2012

0 2017

70 *

2009

2011

2013

2015

2017

Average of the ANZ-Roy Morgan and Westpac-Melbourne Institute consumer sentiment measure of respondents’ perceptions of their personal finances relative to the previous year; ANZ-Roy Morgan index rescaled to have the same average as the Westpac-Melbourne Institute index since 1996 Sources: ANZ-Roy Morgan; RBA; Westpac and Melbourne Institute

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