rising inflation reverses the boom
Dr Kearns noted that although the 225 basis point increase in the official cash rate since May had reduced the maximum home loan amount by 20%, the impact on prices was limited because only 10% of borrowers sought to maximize their property. debt.
He also downplayed the prospect of a real estate crash, pointing to one-third of home loans at fixed rates, the large proportion of borrowers ahead of their mortgages and household net debt no higher than in the early 2000s.
The known unknown is how quickly the inflation epidemic is brought under control, the need to raise interest rates to restore price stability, and the possibility of a soft landing as rates rise sharply, inflationary pressures and labor shortages are slowing construction.
With the immigration cap rising to almost 200,000 people a year, this could put upward pressure on house prices.
While listed real estate was a star performer for investors during the pandemic, it is now leading the pullback as bond yields rise. That’s how fast the world has changed.
Dexus real estate fund CEO Darren Steinberg said he had never experienced a tougher operating environment amid disruptions from COVID-19, then the war in Ukraine and turmoil in China’s property market.
Rising construction costs and debt costs, he said, would break some small- and mid-size developers with weak balance sheets, such as collapsed fixed-price homebuilders.
Lendlease global head Tony Lombardo said that while the property market was in a cyclical downturn, rebar and lumber costs were down, and the return of the migration tap would be a tailwind for the area.
The summit heard that the Parramatta growth center in Sydney’s west, as well as Sydney’s second CBD in Sydney’s north, are oversupplied with office space. But Matthew Bouw, Asia Pacific CEO of commercial property services firm Cushman & Wakefield, said plenty of global capital was racing to invest in high-quality Australian commercial properties, despite the pandemic work-from-home boom.
Charter Hall CEO David Harrison believes all roads still lead to CBD offices with higher density than before the pandemic. Workers who resist full employment upon returning to the office must choose, he said, between a job and career grounded in culture and in-person collaboration, and must fear that their process roles will be automated and replaced. by robots.
Or maybe a recession was needed to reset employee expectations, joked Alison Mirams, boss of construction company Roberts Co.
The founders of Australia’s $1.3 trillion mandatory pension system, Paul Keating and Bill Kelty, said The Australian Financial Review this month that the system’s ESG operating license required embarking on nation-building initiatives, such as build-to-let projects to alleviate the housing crisis.
Yet Bevan Towning, property manager at AustralianSuper, said the union-owned industrial fund affordable housing project in Victoria had been tied to planning bureaucracy for two years under the Daniel Andrews Labor government.
The summit learned that build-to-let was a high-end niche product in this country and, as Chris Tynan of Blackstone Australia said, needed a new name in the country where home ownership ownership remained the great Australian dream.
But the real barriers to build-to-let becoming a viable asset class seem to lie in state government stamp duties and property taxes, and access to foreign capital due to the punitive restraint regime. at source on capital gains of foreign residents.