On elections, sentiments and good news
1 February 2013 – Will Julia Gillard’s early announcement of a late election dampen emerging positive sentiment in the property industry?
Not likely, it seems.
The campaign is off to a rollicking start but in Melbourne, things are starting to move in the property industry.
Property Council of Australia executive director Jennifer Cunich was pretty happy with the financial position paper released by the state government on Christmas Eve, if maybe a bit disappointed with the timing of the release, which meant it slipped notice.
Cunich’s policy staff are now trawling through to find the good news for members.
“There’s a better mood for this year. There’s definitely a feeling that things are starting to move – there’s a lot more movement than before and there’s an anticipation of government announcements leading up the budget.”
Namely in infrastructure.
More good news is that the Baillieu State Government seems to have completed the interminable review process of every program and department imaginable (our comments) and has been active announcing various projects – Planning Minister Matthew Guy in particular with some Dockland and CBD projects; the latter a massive multi-building development on the site of the former Age building in Spencer Street.
Cunich says the lines of communication seem to be opening again and the industry is at least able to get the ear of the politicians and explain the impact of various projected programs or policies.
“The industry is able to able to talk through the issues and how it impacts on the economics of projects.”
The state’s “tune up” program, retrofitting B and C grade stock, still seems to be in full swing, says Cunich.
Well, that’s a relief, given the dreadful anti-environmental stance that this government has been happy to let know. But then that was pre-Obama Inauguration Mark II.
Let’s hear it for green Mr Baillieu!
Sydney: time to shine… a bit
Cunich’s counterpart in Sydney, Glenn Byres, who is ED of PCA NSW says a recent confidence survey conducted by the council reported a “sense of optimism not seen for some time”.
Now if the NSW property industry can put on a brave face then anything can happen. This industry has been nursing an almighty wound since the GFC. In fact it probably thinks it carries a lot of the blame – given the kind of complex financial instruments developed by the likes of Macquarie Bank – which were copied, expanded than expended first on the property sector here, then shipped offshore.
So when Byres says the mood is up, you can believe it’s true. The confidence survey had a “sense of optimism not seen for some time, largely driven by the expectation of further interest rates cuts and easier access to finance,” Byres said on Wednesday.
“The telling thing is, does this translate in a way that finally sees the NSW housing market shift? There’s good sentiment out there but there is still an appetite for production to skip up in a meaningful way.”
Byres has hit the nail on the head with housing: you’d think it was the true heart and soul of the Australian economy at times. In fact, has anyone ever detected depressive sentiment when house prices are trending up?
Guess what? Prices are moving upwards again, slightly.
And if you listen to the housing lobby groups which is so desperate to see greenfield houses mushroom (like creeping cane toads), then you might have guessed that there is pent up demand for housing.
Let’s try, this time round the property cycle, to minimise these scourges, pointed to the poor sods who can’t afford anything else.
Byres says the property industry is also optimistic about the state government’s planning review, but we’ve just heard about a new community lobby group getting alarmed about what’s proposed. (Report to come).
What no community group could oppose though are the plans for the light rail extensions from the CBD to Randwick and the north-west rail link. Oops, we’re forgetting the shambolic handling of the last Metro light rail project.
Byres though, is confident that this latest batch of plans will work.
“The government’s delivery of large scale infrastructure has the capacity to install confidence, whether it’s light rail from the CBD to Randwick or the north-west rail link,” Byres says.
“They’re remaking Sydney and giving it a productivity and liveability kick.”
B and C grade energy upgrades are Go
Paul Bannister of Exergy, now based in Canberra, Melbourne and Sydney, says the prospects for his business and the whole energy efficiency sector are “exciting”, with the big news that it’s the B and C grade buildings increasingly calling for comprehensive energy retrofits. Just as well for consultants, as the big office trusts are all now pretty much averaging a 4-4.5 star NABERS energy rating across their portfolios, he says. Nice to hear.
See our report in this issue.
And overseas, Keith Gunaratne of E P & T Global who is bringing Aussie know-how in energy efficiency to British Land, the BBC and others, is growing the business as well, with now 50 engineers employed in Australia servicing the UK market and another 13 senior executives on the ground in the London and a Hong Kong office in the wings. (A report on a conversation with Gunaratne and some of his very interesting views will come soon.)
Environmental Upgrade Agreements
Movement is still slow on Environmental Upgrade Agreements, even though so many people say they are a fantastic instrument.
One idea flagged by Gunaratne in our discussion is why not make them a Federal Government instrument to override the snags and barriers created at local and state government level?
We’ve heard that one of these snags for instance was contained in an ancient clause of local government legislation, which allows the City of Melbourne (and maybe other councils) to waive council rates if it sees fit. Naturally this frightened the lenders, but has somehow been worked around. At least to the satisfaction of the current crop of financiers on the lending panel.
This is important because repayments for EUAs are added as a charge to local council rates.
The lending panel now includes NAB, as previously, and bankmecu.
Scott Bocskay who head Sustainable Melbourne Fund says the panels aren’t panels as such.
“The way we have set up down here is that any financial institution can lend to EUAs and we encourage building owners to come to us with their lenders, so we don’t have a panel of lenders per se.”
It’s more a case of getting products ready for this specific market, he says.
bankmecu, by the way, is increasingly making its mark in the social/ethical/sustainable space.
It’s now introduced a product through Lend Lease to encourage sustainable input into new homes.
This encouraging product gives a discounted rate of 5.44 per cent on housing loans if the house includes items such as solar power, energy efficiency lighting and water savings measure. It’s called the Energy Smart Loan and is pitched to buyers who can’t qualify for the 7 Star NatHERS rating required for the Go Green Loan.
Nice to see the banks doing what they can to hit that sweet spot which can really make a green world go around.
The closest comparison rate, we understand, is higher, at 5.49 per cent – if just by a fraction.
Ah politics, politics
At the broader level of reaction to the election announcement big businesses pretty well gave the thumbs up to the announcement. It will give certainty to business and households they said in the financial press.
The stockmarket only stumbled from its 10-day rising streak on Thursday morning, starting its rise again by the afternoon and resumed its upward trajectory on Friday.
It was the political commentators who said Gillard’s announcement was poor strategy.
And it was the political commentators who say it will be a drag on business confidence and investment. (That was our first thought too).
He who cannot be named
Our very own politico/property mole thinks the election announcement move is a good one for business confidence, primarily because of the certainty argument.
“This is actually a return of the focus to the Parliament and gives everyone in business a degree of certainty and allows the legislators to pass laws in the Parliament,” he said.
“I don’t think for business it’s a bad thing. I think that business would find the [potentially boring nature of such a long lead time] better than a surprise package. It’s a bit like having a fixed term when you’re not having a fixed term.”
So who will win the day and who will rue it?
In this modern environment of hot-wired, short lived sentiment, where change is the thing that drives the turbines, anything can happen.
For instance, while some polls put the Coalition comfortably in front, in the most recent Nielsen poll and Newspoll the Labor Party was at 48 and 49 per cent of the two party-party preferred vote, up from May last year.
But that was before former Labor and now Independent MP Craig Thomson was arrested on Thursday
See what we mean?
Don’t miss the start of our fantastic new ethical/responsible tourism column from Emma Parry, ex general manager marcomms at Dexus, who over the next many months has taken it upon herself to selflessly and personally investigate the claims of the leading and emerging brands in this space, in some of this planet’s most beautiful locations.