Peter Chittenden, 'the developer's lieutenant'
Peter Chittenden, 'the developer's lieutenant'
Few people in Australia could lay claim to having a more in-depth knowledge of off-the-plan property investment than the Managing Director (Residential) of Colliers International, Peter Chittenden.
Having forged an extensive career in residential property development, project marketing, site acquisition and property valuation, Mr Chittenden has, from Perth to Sydney, successfully launched and sold more than 100 residential projects.
Based in Sydney but with a national perspective on the residential property market, Peter shared with Australian Property Investor Magazine his unparalleled insight into what 2021 might hold in store, the government’s role in shaping the property industry, stamp duty reform, and just what it takes to succeed in this industry over more than three decades.
You’ve been in the industry for 35 years — have you ever had a year that in any way compared to 2020?
In short, the answer is no. Having a year where people were restricted with mobility, unable to meet each other face-to-face and inspect properties meant everything ground to a halt.
That was at a time where the marketplace itself was improving from 2019 – therefore it certainly took a rest for six months.
Towards the end of last year, however, we saw that it was starting to pick up.
Capital city prices have been rising, as well as most regional markets. Given the high levels of debt, persistent employment insecurity, an economy facing headwinds such as a major trade dispute with China, what are the drivers behind this resilience in key property markets?
The market itself has incredibly good fundamentals. With low interest rates, and at the time (pre-COVID) very low vacancy rates for quality rentals - we were seeing plenty of confidence in the market post its dip in 2017. People weren’t as affected as they thought.
Governments across all states handled the situation with COVID very well and we weren’t affected anywhere near as badly as it could have ended up.
Overall fundamentals remain positive for property – low interest rates mean investing in property, and not saving your money in the bank, presents a positive opportunity.
What cities, market price ranges and building types do you see performing best in 2021?
All capital cities will perform well in 2021. This is a general comment, however, each has its own characteristics that will enable them to do that.
Starting in Brisbane – they have truly benefited from the HomeBuilder Grant introduced by the Federal Government, coupled with the fact that house and land supply is low, the demand is therefore outstripping the supply. In that market, Queensland has been very resilient against COVID and there is a lot of confidence there.
Newcastle is an area that is very much lacking in supply. We have seen close to 10 per cent growth in this city 2.5 hours north of Sydney. I believe this is due to interest rates, all the fundamentals of property being positive and also the fact Newcastle is a regional area.
In the past 12 months, regional areas have experienced increased demand with people looking to relocate to those areas for a lifestyle change.
Sydney will grow. There has been a limited supply of new products released to the market.
However, having said that, the growth will still be patchy. There will be the “haves and have-nots”. The “haves” will be in those areas that are low in supply and typically in strong geographical areas - however eventually that will all wash through.
The off-the-plan market was the most affected, however we are starting to see a lot more interest and are anticipating investors coming back to the market this year to support that.
Canberra is lacking in supply. We are seeing that government employees did not seem to be affected at all by COVID. Those buyers are fairly bullish in the market and are actively looking to invest.
Victoria/Melbourne have been the most affected by it all and that has correlated to their price point. Positively, they have a large growing population, an enormous amount of growth and are anticipated to be the biggest capital city in Australia in the near future. We don’t see the negative mark that has been put on them lasting for too long.
All in all, we share the national fundamentals – lack of supply, strong rental yields, wealthy buyers not as affected as others, and of course low interest rates. All cities we feel will do well.
In August, API reported on off-the-plan apartment sales being hard hit by COVID. As this is a particular area of expertise for you, have the past few months changed the outlook for this property segment?
In the past few months, despite no new project launches, we have seen an incredible growth in sales, which we feel is down to a ‘fear of missing out’.
Previously people haven’t been activating or looking at off-the-plan opportunities, whereas now they are seeing the reported price growth and have realised if they don’t move quickly and buy now, they may miss out.
The number of buyers who are attracted to new product and are activating has almost tripled over the last six months, and our sales figures reflect that.
What do you see as the government’s role, federally or at state level, in shaping and supporting the property market?
All government roles are to remove (where they can) the cost of transaction. The property and development industry are one of the biggest employers, if not the biggest employers in the country. This is particularly so in hotspots where there is opportunity to employ 800 to 1000 people through construction of a building or a tunnel.
Barriers to entry, and costs that detract us from doing transactions, is where the Government could look at improving.
There is the opportunity to improve the stamp duty process, particularly for off-the-plan, with either the removal or discounting of stamp duty.
Off-the-plan would encourage jobs and encourage construction, whereas with completed product the dwelling is already in place and doesn’t necessarily contribute to the economy as much as off-the-plan.
Having said that, if they do create jobs and these people are paying taxes, buying equipment, materials, or fixtures and fittings for something off-the-plan, that produces GST and the multiplier of the dollar, which well exceeds anything that could be achieved by a one-off stamp duty.
The RBA has been vocal in support of NSW and Victorian announcements on stamp duty reform or abolition. Do the changes being proposed offer genuine respite to buyers and go far enough or are they only being replaced by other forms of tax?
In my opinion – no they don’t. I believe having a situation where the stamp duty is against the improved value of the land at the time of exchange, is the most relevant and most equal to something that has a house already built on the land.
The highest risk of someone purchasing is immediately off-the-plan before it has started, and as it reaches financial close, and as construction starts the risk to the buyer is reduced – meaning they can therefore pay more stamp duty.
I don’t feel like they have pushed far enough with the proposed offer and have overcomplicated it.
Eventually everyone will choose the land tax system. This would prove a negative outcome for someone such as a retiree who has at last paid off their house, and finally wants to look after themselves – they simply won’t be able to afford the yearly repayments of the land tax. This could result in them having to choose to sell their house and rent due to affordability issues. That situation will catch up with everyone.
It is also possible that we might see people discriminate when purchasing a property – i.e., is this subject to land tax or can I pay the stamp duty?
As an advocate for the property industry, what industry bodies or groups are you involved with?
Urban Development Institute of Australia (UDIA) NSW and Property Council of Australia are the two groups.
As managing director of such a multi-faceted operation, what are the skills and attributes required to successfully fulfil such a position?
I think you have to be, what I call, the developer’s ‘lieutenant’. You must understand the challenges and risk that come with creating a development and making off-the-plan sales, and the amount of responsibility that has been given to us to get the job done.
If you don’t have a full understanding of the development process you cannot appreciate how vitally important it is to know the risks involved. There are many factors - the cash flow modelling, understanding your client’s requirements and how to get them there.
It is not something that just happens - there are courses that can help you along the way, however nothing beats experience, including experience of the good and the bad, and what could happen next to enable the anticipation of the process so we can get it right on every project, because every project is different.
The best way to do all of that is to be involved all the time, be committed and make it a bit of a hobby or even a craft – and not just look at it as a job where you show up and just leave.
Your corporate biography states that you’ve helped grow your team and the residential division by more than 300 per cent. In such a competitive industry, what strategies have fuelled this growth?
Putting the right people around you and trusting them to do the job properly is really the key.
What did you want to be when you were growing up and when did property appear on the horizon as a potential career path?
I never really knew. It wasn’t until I joined LJ Hooker at Kings Cross that I got the property bug. It bit me and that was it, that is when I knew I wanted to be in property.
I do really enjoy the technical side of development more than I do selling existing homes. Selling off-the-plan is very different and more technical than selling a house.
The only reason I am in this job now is because I wanted to be the best I can be. I needed to be formally trained, theoretically trained as well as practically trained. Fast forward and this is where we are now.