Development News

Property sector staying positive in current environment

But inflation, skill shortages, and disrupted supply chains are all having an impact.

Macro-economic conditions have caused a decline in confidence in Australia’s property industry, yet property companies anticipate positive forward work and workforce projections off the back of solid pipelines, according to the latest ANZ/Property Council of Australia (PCA) survey. This positive outlook comes off the back of a Property Council survey of than 750 members which found while the overall Confidence Index dropped 19 points nationally in the June quarter, it still remained in positive territory (118 index points) and slightly below the long term average (124 index points). A score of 100 in the Confidence Index is considered neutral.

PCA Chief Executive, Ken Morrison said despite the decline in confidence caused by larger external factors such as inflation, skill shortages, and disrupted supply chains, the sector remained positive about its own work pipelines and staffing plans. “What we’re seeing in this survey is a steep confidence dip in the broader outlook, yet specific firms remaining optimistic about their own business conditions,” Mr Morrison said.

“There is no doubt that the lingering effects of COVID, inflationary pressures and interest rate implications, energy and staffing shortages as well as global geopolitical issues, have left a dent in confidence, and that comes as little surprise.” However, he said, when asked to reflect on their own business plans, respondents felt well positioned to withstand those headwinds which is why, combined with historic low unemployment figures, confidence overall is still in positive territory. Conducted between June 6-22, 2022, the survey showed future staffing level expectations remained positive in every state and territory over the quarter, with Victoria (31) and Western Australia (30) returning the strongest figures. A score of 0 is considered neutral.

Future work expectations also remained in positive territory but saw declines in every market aside from WA.

The impacts of COVID also linger, with respondents in most states expecting the pandemic to further hinder business conditions. Additionally, the survey found the virus is expected to cause the greatest impact to the commercial office sector.

Until this most recent survey, the hotels, tourism and leisure sector has consistently ranked highest in terms of COVID impacts.

“After experiencing a significant downturn at the onset of the pandemic it’s heartening that construction activity expectations in the hotel and retail sector continue their upward trend,” Mr Morrison said.

“Consistent with previous surveys, housing supply remains the most pressing critical issue for governments to solve at both the federal and state levels,” he added.

ANZ Senior Economist, Felicity Emmett said property sentiment has taken a hit on the back of two rate rises already delivered by the Reserve Bank, and the expectation of a steep increase in interest rates over the coming year.

“The prospect of sharply higher interest rates, the turn in the global outlook, and talk of a US recession have all taken their toll on the economic outlook,” Ms Emmett said.

“Firms are now the most downbeat about the economy than they’ve ever been outside of the worst of the pandemic in 2020 and are particularly negative about the availability of debt finance.

Hotel investment appetite remains strongest in Sydney, Gold Coast and Brisbane

Despite a consensus that per-room revenue in some major cities could take three-to-five years to recover to pre-pandemic levels, nearly 90 percent of hotel-industry participants in Australia and New Zealand are looking to maintain or increase their exposure to the sector,

This positive outlook is one of the key takeaways from a CBRE Hotels survey of more than 70 hotel owners, investors, developers and industry consultants, covering topics ranging from revenue recovery to asset values. The survey shows the signs of recovery are clear in responses to the Market Conditions Survey, as tourism in both countries ramps up following two years of closed borders, even with recent volatility in financial markets. Asked whether their investment outlook for the sector had changed since early 2020, 50 percent of respondents indicated they would invest more, with a further 38 percent answering their investment level would remain the same. This is in spite of 62 percent of participants believing it will take three-to-five years for international arrival numbers in Australia and New Zealand to return to 2019 levels.

Most of those canvassed put the same timeframe on revenue per available room (RevPAR) returning to 2019 figures on an annualised basis in Auckland (69 percent of respondents), Melbourne (63 percent), Sydney (54 percent) and Perth (46 percent). There was more optimism around RevPAR bouncing back next year in Brisbane (51 percent of respondents) and Adelaide (49 percent). Corporate travel is another cause for encouragement, with more respondents expecting demand to return to 2019 levels next year (44 percent) than over a three-to-five-year period (39 percent). CBRE Hotels Regional Director, Valuation & Advisory Services, Troy Craig said the hotels sector is continuing to recover from the impact of closed borders. “While in-bound international traffic is still muted, and survey participants expect it will take three-to-five years to fully return to 2019 levels, recovery in the corporate sector is widely expected to provide a further boost to the current upward swing in 2023,” he said. According to CBRE Hotels Managing Director Capital Markets, Michael Simpson, the industry’s optimism is underlined by the fact nearly 90 percent of surveyed stakeholders are keen to maintain or increase their exposure to the sector, with only 12 percent looking to reduce their positions. Half of the respondents anticipate higher interest rates to flow into yields, but 58 percent do not believe inflation will result in stronger average daily rate (ADR) growth. Capital city hotel values are expected to rise over the next three years, with 55 percent anticipating growth of up to 10 percent and a further 11 percent tipping larger rises. Queensland and New South Wales are considered the mostattractive markets for hotel purchases or development, with just over three-quarters of respondents expressing an interest in those two states. That corresponded with Sydney, the Gold Coast and Brisbane ranking as the cities expected to perform most strongly over the coming year. “Two-thirds of our survey respondents see growth in asset prices over the medium term, in line with recovering visitation,” Mr Simpson said. “Queensland and New South Wales are clearly the markets attracting the most interest, with Sydney also expected to be 2023’s strongest-performing city.”

Students are back! State of the art, multimillion dollar, student digs open

After two years of rolling lockdowns and construction restrictions, the $66 million Scape Lincoln College in Melbourne has officially opened its doors, right on cue for the start of Semester 2, 2022.

Scape Lincoln College

The 33rd building in Scape’s national portfolio, and the 11th building in Melbourne, the 12-storey building features over 460 beds spread across modern studios and share student apartments, each with bathrooms, kitchenettes, a full suite of appliances, study areas and smart storage solutions. Students also have access to two levels of communal space as well as a commercial grade kitchen with an external terrace located on the 11th floor linked to an internal kitchen that allows the space to be opened or closed off to cater for all weather events. The rooftop will also feature Scape’s urban beehive program where bee colonies are maintained, and honey harvested for students to enjoy. Other amenities on offer include a rooftop area, cinema, large gym open 24/7, a music room kitted with electric guitars, keyboard, drumkit and recording equipment, and the latest culinary offering, Scape Eats, where delicious and healthy chef-cooked meals are included in the rent price. Scape CEO and President of the Student Accommodation Council of Australia, Anouk Darling, said her organisation was committed to helping re-establish Melbourne as a leading global education destination and will continue to invest in more developments in Melbourne. “The pandemic was devastating for the international educational industry, and we know how difficult it has been in Melbourne,” she said.

“We are so excited for our students to experience our latest building, Scape Lincoln College. We have reimagined the student experience by giving students everything they need to love their student life in a new city, with new friends.“ Lord Mayor of Melbourne, Sally Capp said international students are a vital part of Melbourne’s economic, cultural and community landscape and the Victorian capital wants to be known as the world’s best city for international students. “And that starts with making sure they feel supported and welcomed during their time here,” she said. “Ambitious projects, such as Scape Lincoln College, that combine accommodation and lifestyle support, go a long way to making us an attractive option for those looking to complete their studies here in Australia.”