Pandemic pushing Aussie developers closer to Asia

COVID-19 may have forced individuals to stay apart and put the brakes on international travel, but in Australia’s property sector, the pandemic has accelerated the opportunity for developers to collaborate with their global counterparts, albeit in a digital manner.

This week, Australian Property Investor Magazine caught up with architect and project manager Lui Violanti, who runs the Western Australian office of global construction consultancy Inhabit Group, and also heads the judging panel responsible for highlighting the best of Australian architecture and development for the PropertyGuru Asia Property Awards.

Mr Violanti has more than 20 years of experience in Australian development, working on several prominent projects over that time including Myer’s flagship Bourke Street Melbourne store, the Melbourne Park Western Precinct and Melbourne’s Emporium.

Ahead of the PropertyGuru virtual ceremony for 2020, which will be streamed online this week, Mr Violanti shared his thoughts on the COVID-19 pandemic’s influence on Australian development, as well as what the PropertyGuru awards mean for future projects.

What’s been the biggest impact on the Australian development and construction sectors from COVID-19?

There were some glitches, some projects that stopped and started and were extended, but I think the government made the right call as far as keeping construction essential.

The projects that were put on the backburner were residential complexes and towers, but there has been strong demand for those as we come out of COVID so they are coming back on stream too.

There was a bit of concern on the east coast, especially in the lockdown states, but I think that the market has adjusted very well post-COVID. 

The slowdown in multi residential development, is that going to have repercussions for housing supply in 12 to 24 months, when these projects were originally slated to be completed?

Yes, they have all had knock on effects and delays. One of the biggest problems that we have encountered is the supply chain, most of our builders get supplies from Chinese manufacturers. 

The projects that we have been involved in around Australia, there seems to be a three to five month lag. 

China suffered the virus first and they shut down quicker than anybody and everything shut down. Now it’s a bit of a catchup game, trying to supply the market again.

I’m seeing that now, China is pushing products through so developers will get back on track again, but it has caused a bit of grief with cash flow, because most Australian developers are reliant upon pre-sales, then they’ve got all of the holding costs until they finish building.

It is a different model to the Asian model, where they progressively pay during construction, so developers have been under a bit more stress in Australia.

Do you see that lag being a major issue going forward?

It’s less of an issue because China was in first and got out first. THye’ve geared themselves up again quicker than most countries around the world. That will soften the blow and cushion the effects.

I don’t think it is going to be as bad as we may have thought six months ago. That’s my opinion from what I’m hearing from the companies that I’m dealing with.

How would you rate the levels of confidence among developers, is there a lot of positive sentiment starting to emerge and how does that compare to just a couple of months ago? 

Let’s start with Melbourne first. It was pretty dire because of the measure that were taken for lockdown, and a lot of people who were working remotely to cater for the construction and development arms, they had to do it remotely and that took its toll. But as the construction kept going  through this, albeit a bit slower, confidence didn’t wane too much. 

Some projects were put on hold because there would have been funding concerns and sales concerns, so they were pushed back, but from what I’m hearing, there is a shortage of rental properties, particularly in Perth, and the government inputs have created a bit of a spike in the market, if anyting over here.

Mind you we needed it over here versus the east coast. They were very hot in Sydney and Melbourne and too a lesser extent in Brisbane, they were hot markets anyway. They will adjust and get back to normality again.

Developers over in Perth, it seems to be full steam ahead, Finbar is going to start Civic Heart, Blackburne started work on One Subiaco, there are some major projects going on, does that boost confidence throughout the entire residential sector in Perth?

Companies like Finbar, Edge Visionary Living, Stirling Capital, Blackburne - they are all pushing forward major projects. I think the problems over here are not the actual projects, but getting through the planning process is a different matter.

A good thing that’s come out of these unprecedented times, however, is the fact that the government is trying to fast track projects as well.

It’s great that the NSW government is fast-tracking infrastructure projects, but do you think there needs to be more done to address the perennial undersupply of dwellings in Sydney?

Absolutely. The first easy target for governments is always infrastructure, because they can bring that money forward in their capital works programs and their forward projections, they can do that. But they have tried to influence the decisions made to help developers bring their projects forward.

Once again it is beholden upon the planning authorities and the councils to do more. They are trying but sometimes they get bogged down because of minority groups. If we could put in some type of legislation or some type of gazetted document which may help move things forward, I think that’s going to be very important in the marketplace.

You work across all states, would you rate any planning system that’s performing better through this crisis?

I spend a lot of time in Melbourne and the VCAT process has worked well, but you have to be geared up and it costs a lot of money to push things through. 

Perth has different planning authorities that take a more forward look and decision making away from local councils for projects of a certain size and scale. 

It’s an evolving process, I don’t think any state is doing it better but they all learn from each other - someone will put in place an initiative and the other states will follow that model, or will improve upon that model.

Tell me a bit about the PropertyGuru awards, and how developers can benefit from being involved?

What this does is put forward projects throughout the Asia-Pacific region that other authorities can look upon as well, and say ‘how can they create such beautiful projects and a return on investment for the developers’?

Over here, sometimes we do hold it back a bit. I think this dialogue opens portals between all of the developers throughout the region. 

We encompass two thirds of the world’s population within the 14 countries involved in these awards, so the connection and the communication is invaluable. Planning authorities should start engaging with PropertyGuru also, because those lessons can be learned in Australia as well.

The important thing about this is it brings out different ideas for developers. And also the developers can talk amongst themselves about the different models that they use to fund projects as well. I think that is something that’s going to come out of this further and further, as we discover how a developer in Asia can have an advantage from a different structure of payment in Australia.

Australia is very lucky to have Asian investors to come into Australia and build projects. A lot of those developers are self-funded, so they bypass the banking systems and financial institutions in Australia. The other models which we are encountering now is to solely design and build for rent, which is a new model in Australia.