Peter Chittenden

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In a little over five years two aspects of real estate marketing have been transformed; the popularity of auctions in the private treaty market and the maturing of marketing new apartment projects off the plan.
For many private vendors auctions are now the number one way to sell a home and off the plan sales now dominate the apartment market, and there are many reasons why buyers have embraced these trends. While I want to concentrate on off the plan marketing, auctions share one key advantage and that is certainty.
When the gavel falls the buyer is certain that they now own that property. I think that much the same can be said for our off the plan buyers, and while the actual method of sale is clearly different today’s project marketing does I suggest deliver that same feeling of certainty and security and we can in part thank the GFC for this.
However, I do acknowledge that not that long ago buying off the plan was not always risk-free. But today buyers have made this a popular choice and I think in the main because of the quality of planning and marketing that goes into any new project and it is here that the impact of the GFC has had played a role. Post-GFC the requirement for a high percentage of pre-sales to 80% plus became the norm and in response developers realised the importance of quality marketing which buyers embraced.
Firstly a fundamental; buyers, whether they are owner occupiers or investors, can have the pick of apartments in a new development. They can in some cases personalise the interiors and there is an opportunity for capital gain if the market moves up between the contract date and settlement.
While it is true that there are some risks in purchases off the plan, including the fact that buyers are financially bound to projects that may in rare cases be delivered late in today’s market professional developers know and greatly value of their reputation. The delivery process is well managed and a majority of buyers are more than comfortable with the fact that time can be on their side. Time to organise the sale of an existing home, or organise finance or for a SMSF investor time to plan without immediately tying up all of their capital. In some but not all states there can also be stamp duty savings alongside the fact that stamp duty is usually a differed payment, and properties are secured with an interest earning deposit, which is usually 5% – 10%.
One final point in the buying process is the format and content of contracts; these are now very familiar areas of conveyance and are no longer seen as a hurdle for solicitors and conveyancers to negotiate on behalf of their clients, its all very transparent, a seamless and reliable legal procedure for buyers, including first time buyers.
The appeal of new
A key a feature of buying off the plan is the appeal of the new, a new building, but also in many cases a new community or a new development area where the wider prospects beyond the building itself are also very attractive. It’s also seen as an exciting process and buyers have readily taken to buying after the conduct of an ROI (registration of interest campaign) this process gives buyers ample time to look into every aspect of a project, an this is where much improved marketing support delivers results.
Off the plan no longer involves ‘second guessing’ – which in the past had been a criticism. The problem being that people did not know what they were buying, but this has not been the case for many years.
Marketing assets and the depth of information available to buyers is now very impressive. In fact for some major developers the sales path has morphed into a full brand experience that is totally focused on the buyer in a constructive and imaginative format. And when success is counted, or a project launches with stunning results it can all be traced back to quality.
Today’s off the plan market is constantly underpinned by quality and nothing is left to chance. Buyers have access to a wide range of assets from easy to navigate web sites and easily understood floor plans, to complete display apartments with detailed finishes options and this is an investment made at considerable expense and I think does act to re-assure buyers. I think it is also worth noting that even when there is strong demand for projects, short cuts are not being taken, marketing still remains a high priority.
This is important, because while buyers are now days very comfortable with off the plan marketing, standards still have to be always improved, an active market is not a reason to relax standards and the quality of marketing.
Wider horizons For buyers
Another tick for off the plan buyers is earned by the fact that thanks to the quality of marketing material and support many buyers now look well beyond their own home markets for opportunities. We now have projects sold to a cross section of buyers from almost any location and that includes offshore buyers.
While this part of the market was always there the quality of marketing has now made it very easy and we know that buyers from say Sydney are only to happy to buy off the plan in Brisbane or Melbourne, or an off-shore client will look at any location. This portability of location is also a great bonus for investors who now have the ability to access any market with confidence. We have come a long way from the days of a fabled ‘free flight’ to the Gold Coast or other location as a honey pot incentive to a potential client. Today the depth and quality of information is a foundation for great portability in the apartment market.
Off the plan marketing is now very attractive, it’s the norm for even the most inexperienced of buyers with standards, quality and innovation always increasing. The market is very comfortable with the ability to access varied projects and locations, with time to plan and with the certainty of a known price all supported by quality marketing.
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Why buyers rush off the plan marketing

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Each year in Australia there are about 50,000 divorces, although the ABS figures were last published in 2012, the divorce rate had been in steady decline since peaking in 2001.
Divorce is one of those key social factors that does have a marked impact on the residential property market, and sometimes in surprising ways. I frequently come across mainly males who ‘unexpectedly’ find themselves in the housing market where finding a new home can have a material impact on diverse areas from location to design.
For both males and females granted a divorce in 2012, 60.3% were less than 45 years of age at divorce, while 51.0% of males were less than 45 years of age at divorce. The highest incidents of divorce is then in the age bracket of 40-44 years of age, and this fact alone is not worthy as this age bracket is also when people are at the peak of their earning and debit capacity.
We earn more in our 40s but also that’s when debt, including mortgage debt peaks, and so this along with the fact that many married couples in this age bracket will also have kids in their late teens, we are looking at a tricky situation. For some this can result in them having to enter or re-enter the housing market in a ‘gun to the head’ state of affairs.
A Mix of Family, Personal and Financial Needs
The impact of divorce on housing is far reaching and is underscored by the fact that in 2011, there were some 24,144 divorces involving children under 18 years of age. This represents 48.4% of all divorces granted.
The complexity of financial arrangements is further explained by the fact that the median length of marriage increased from 10.5 years in 1992 to a peak of 12.6 years in 2005. Since 2005 it has decreased slightly, with a median duration of marriage to divorce of 12.2 years recorded in 2012 and so over the intervening decade plus, many families would have purchased a home and be close to the mid-way point of their loan terms.
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Divorce is one of those key social factors that does have a marked impact on the residential property market, and sometimes in surprising ways.
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Another key reason why divorce for people in their mid 40s impacts their home living arrangements comes via the fact that over the last 20 years, the proportion of joint divorce applications has been on the rise, and the proportion of one party applications has been on a downward trend. Now joint applications remain the highest and they account for almost 40% of all applications.
There has also been another and possibly related demographic shift, and that is the number of children aged below four living with two parents has been on decline for some years, while the number of children in the same age group living with one parent has been on the increase. With more sole parents, housing demand has been shifting and this trend may well continue to grow.
The rate of divorce may well continue to decline if couples do not marry for the reason of looking after younger children. But when they stay married the entire family unit will be older and this will further impact housing outcomes when a divorce does happen.
Housing Post Divorce
It does appear that at times couples could well be putting off getting a divorce because they simply cannot afford all the costs involved in re-housing. However when in their mid 40s there is evidence of some degree of greater mobility, although at a cost.
One hurdle will be the costs associated with buying and selling two homes. Coinciding with a real estate slump during the GFC divorce rates declined, because couples without ample money to spare were forced to stay together because no one wanted to sell the family home at a loss. Possibly because in the past the individual who kept the family was in the end financially better off.
However we also see many couples leaving the family home with the female partner and the children with males moving on, which is helping to create demand for smaller apartments to both buy and lease. This demand is also causing some males to look for accommodation near the family home, and this would directly reflect the no fault trends that I detailed earlier.
However women in particular are becoming less attached to the old family home, wanting to begin a new life in a new home and this again is having an impact on the demand for smaller apartments.
However while some divorces do result in the forced sale of the family home, higher real estate prices might well be causing couples to work harder on the relationship to avoid the complications and costs of dealing with the family home.
We are seeing more flexibility in what type of new home divorcees are seeking and this helps create demand for new projects with a good mix of product for sale. After all, for both parties a new well-located apartment can now be an attractive option. But for now we will have to wait a few years to see if current high property prices keep a ‘lid’ on divorce rates.
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How the demographics of divorce affect property

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The purchase of domestic real estate, and in particular residential real estate, is a topic that frequently attracts a lot of attention.
That’s nothing new; some of the same ‘concerns’ we hear and read about today have all been aired before. At various times and across different markets we have, for instance, seen big in-flows of money from Japan and the Middle East.
However offshore investment into our housing market always tends to be a touchy subject. I think that we should not see this as threatening or abnormal and as far as new projects are concerned, the impact of these buyers needs to be seen in the greater context of the total market.
It is unfortunate that currently any negatives surrounding this debate are being fuelled by a number of factors. Key among these is the reality that the inflow of funds is not aligned with our general market conditions. So as we see prices increase, and in some markets this may be impacting first time buyers, some blame is being attributed to offshore buyers. But there is also a clear benefit from the fact that demand in total is now driving a big increase in construction activity, and that is at a time when the local economy needs that stimulus.
Key motivations
Part of the reality of this trend is the fact that across Asia and in particular from China there is a weight of money available for investment. some of that money is regardless of any policy settings, naturally going to flow into our residential property. But are the key motivations of buyers necessarily any foundation for concern? I suggest that these buyers are in the main driven by motivations that we are all familiar with.
Accepting that almost all markets now operate on a global basis, offshore buyers will be motivated by quality of life, economic stability, good infrastructure – this includes both hard infrastructure like roads and everyday services such as power and water, but also soft infrastructure and a big item there is education and medical facilities. Lastly offshore buyers are attracted by political stability. A quick tally would clearly give Australia a big tick on all of these items and so it’s a good and appealing place to call home.
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There is clear benefit from the fact that housing demand is now driving a big increase in construction activity, and that is at a time when the local economy needs that stimulus.
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We also now have in Australia inter-generational changes that are reinforcing family ties and these are a big influence. it’s worth keeping in mind that we have seen this trend before. In particular as post-World War Two and post Vietnam brought about new waves of population growth.
I think that it’s easy to identify with these motivations, and also like most of us, it is the stability of the Australian lifestyle that is a strong appeal.
SENATE REVIEW
However now, and somewhat predictably, The Treasurer has asked the Senate <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/House_of_Representatives_Committees?url=economics/index.htm" target="_blank">House Standing Committee on Economics</a> to inquire into and report on Australia’s foreign investment policy as it applies to residential real estate.
A key starting point is the principle of Australia’s foreign investment policy, as it applies to residential property, is that the investment should increase Australia’s housing stock and as such this includes new developments that aim to deliver benefits to the local building industry and its suppliers. Which is now starting to happen.
Off-shore or foreign investors cannot generally buy established homes; however, temporary residents can apply to purchase one established dwelling to use as their residence while in Australia.
Despite these conditions and in view of some of the concerns already outlined the Committee has been asked to examine:
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<li>The economic benefits of foreign investment in residential property;</li>
<li>Whether such foreign investment is directly increasing the supply of new housing and bringing benefits to the local building industry and its suppliers;</li>
<li>How Australia’s foreign investment framework compares with international experience; and</li>
<li>Whether the administration of Australia’s foreign investment policy relating to residential property can be enhanced.</li>
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This looks like a quick review with the Committee’s report due in early October 2014.
LET’S NOT FORGET OTHER POLICIES
If as it appears the Senate Review is partly in response to helping keep homes affordable in particular for the FHB market, then it would also be an ideal time for government to look at how much government charges and red-tape adds to the cost of a home.
Stamp duty for example is levied on the GST already built into the cost of a new home, and development delays almost defy reason without any real benefits.
Could all levels of government be more engaged in creating a positive environment for new housing by direct leadership and by ensuring a more collaborative, results focused view among decision makers that directly or indirectly impacts housing supply and costs.
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Offshore buyers are here to stay

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In today’s market what makes the great foundations for an exceptional residential development? 
While there are an array of possible ways to benchmark and answer this question that may well satisfy planners, developers, marketers and financiers, we are also faced with another question, "what makes a great project for the buyers".
Buyers face lots of choices and while they can easily access mountains of research and commentary, I still think that when we take a project to market we still need to answer this question. Easily. Even more so when we are talking about selling off the plan, where a focus on the elements of a project with great foundations, is a sound way to approach the market.  
Market conditions are always changing; today’s projects that sell-out in just hours, days or a few weeks, might not do so under tomorrow’s market circumstances. 
There are some key aspects to regard as our key project fundamentals, many of which are interconnected. 
Always from both the developers and buyers viewpoint are: Infill locations, the use of existing infrastructure, environmental credentials and sustainability, access to open space, design, equally the overall and apartment design, communications, the appeal of mixed use developments, the liveability of the development and finally sales appeal.
While I am not suggesting this is an exhaustive list, I do think that by looking at each element, we will then start to understand how they help form the foundation of great projects and why buyers frequently use such key attributes to inform their purchase.
Infill locations attract both positive and negative feedback, but these are locations are essential to helping plan any major city and they are the mainstay of most medium density development and (once the dust settles) are generally seen as a more desirable way to plan and deliver new projects. They not only create new homes but they usually are very good at connecting new neighbourhoods and so they are very appealing to buyers.
The use of existing infrastructure is naturally linked with the appetite for infill locations and local infrastructure will include rail links, schools, shops and parks, in fact any easy to access facilities. Buyers are quick to identify the importance of these facilities and it has to be acknowledged that in some locations new developments add user pressure, which is an area that both government and developers always need to plan and be mindful of. 
However the value gained from the use of existing infrastructure and where necessary improving facilities is easily illustrated because the costs can be massive. Some recent figures I saw from the USA make the point. There a modest extension to street curbing was quoted at US$78,000, a new set of traffic lights US$280,000 while a mile of new subway would cost US$1 billion, so the use of existing facilities via infill locations looks like an obvious choice.
Environmental credentials is a major topic, in some cases it’s a marketing must have and is made up of many varied parts from the familiar, like the use of solar and water recycling to the less common such as on-site energy generation. We also need to include the provision of new green space and access to open space, including passive open space like golf courses. However again here we can have a clash between the needs of already established communities with the desires of new residents, but for the developer this can be a great foundation element.
Design is another constantly evolving foundation element; it’s very topical and one of the items that is close to the heart of any buyer. Design covers a wide strategy from the masterplan of a development and its impact on the local environment into areas like apartment size, clever features, cross ventilation, variety and innovation, attention to detail; down to such everyday items like the number and size of parking bays and storage.
Communications is both a simple and complex area. Every buyer today expects to open the door of their new apartment, walk in, switch on their PC, laptop, tablet or whatever device they have and be instantly connect to the world.
Mixed use developments on the development star ratings offer some challenges, usually at the planning level, but they also offer great opportunity and generally they help create a more connected local community because they bring new variety that can be used by everyone, not just the new residents. In creating a dynamic mixed-use development variety is important because it can be exciting and a wonderful ongoing benefit to the entire community.
Liveability really brings together all of the aspects already outlined. There is no single pointer, it’s a combination of cultural, economic and environmental issues, and it also includes diversity and population demographics as well as civic and planning values. But it might also be seen as a sense of place, in reality a place where people want to live.
Sales appeal is the final point but from a marketing perspective, it’s the litmus test. Any project needs to be a commercial winner and the aim is to inform the marketing message, but to also help buyers in their own minds answer what really makes a great development.
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The foundations of a great residential project

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I am not an economist and after the release of the federal government’s Commission of Audit report this is a fact for which I am somewhat grateful.
Having stated my position on the economics involved, some of the Commission of Audit’s 86 recommendations could, it appears, from all of the commentary potentially re-shape Australia. It could re-shape many aspects of society and many aspects of Federalism, which seems a shame really given that only last year, Canberra, the seat of Federalism, celebrated its 100th birthday – just as well it’s not this year.
Part of the intention of the report was to spark a conversation about what sort of society we want to be, in particular over the next 50 years or so. And it appears that conversation has got off to a flying start. When you search ‘Commission of Audit Australia’ on Google there are already some 280,000,000 references.
I have found myself asking the very specific question of how will the report impact the residential housing market? How will the report influence buyers and developers now and over the next few years?
It might be foolhardy to venture into this territory while the report is still so new, but I want to join the conversation, and because the report will reach into so many areas of our social structure I think the conversation is urgent.
A Shift in Demographics
Over the years the market has had to live and adjust to some big issues, like the introduction of universal superannuation guarantee levy (1992), the GST (July 2000), the 9/11 attack on New York and Washington (2001) and the GFC (2007/2008).
However even these big events did not have some of the potential impacts on the very structure of government and beyond that the wider demographic of the Australian population, and it is in the potential demographic changes that a much wider topic opens up for discussion relative to housing and the development market.
And while some changes are not due until mid century, I stop today and think how in just over two decades the arrival of the superannuation guarantee levy is now, thanks in part to the growth of SMSFs, central to many aspects of the residential housing market.
And some seven years later we are still in part dealing with the GFC and so it does not take a crystal ball to appreciate that change can be both long-term and to a degree painful.
Shifts in Demand Shifts in Confidence
Post the audit report in Sydney this weekend auction clearance rates were reported at some 77%, that’s down a little on some recent weekend results, but still slightly higher than the last few months. However after the delivery of the federal budget on 13 May the combined impact on consumer confidence will come into sharp focus over the next few months.
Consumer confidence in Australia increased to 99.73 in April of 2014 from 99.46 in March of 2014 but has been on a falling trend over the last six months.
While the level of consumer confidence is a closely watched measure of the economy, shifts in demographics are far more subtle and until now have been less in focus.
It’s somewhat remarkable how the impact of the baby boomer generation has now started to consume the government’s attention, despite the fact that this age bracket was always going to cause pressure points as it moves out of work and into retirement, and the property market has been feeling the presence of the ‘boomers’ for some years now.
Demographic Touch Points to Watch
The proposed change to the retirement age, has grabbed a lot of attention because it has the potential to impact the entire population. This change could have varied and possibly unexpected effects on the housing market; delayed retirement could impact the demand for downsize opportunities, it could also force more people to consider selling sooner to fund the gap between their retirement and ability to collect the pension and linking the family home to any sort of pension means this would be a big change.
The family home would move into a different light and how a future inheritance is impacted could change the housing ambitions of many younger people. While changes to the cost of education could re-shape the sometimes already fragile prospects of first time buyers, as they have to fund a degree well into their careers. This could also lead to a lowering of employment prospects and impact the earning power and relevance of the middle class in the housing market.
While the audit did not directly comment on tax issues, there is an ongoing debate about the GST – an increase could impact the market, but if there is also a change in the relationship between the Commonwealth and the States, then we could see greater mobility and demographic changes across state boundaries.
Infrastructure and Privatisation
One clear result of the audit will be greater pressure for all governments to venture into a wholesale period of privatisation. This may well deliver some greater opportunities for the property development industry, and the potential sale of the Defence Housing Authority would be a very competitive process.
However the real test will be an assurance that a real improvement in infrastructure must result, if it does not, or if projects are badly delivered this could impact the continued recovery in the housing market.
This is a conversation set to take a lot of time and effort, and so I wanted to remind myself of what an audit of this kind sets out to achieve; "A systematic check or assessement, especially of the efficiency or the effectiveness of an organization." 
While demographics: "The characterises of a human population, especially the size, growth, density, distribution and statistics regarding birth, marriage, disease and death." 
With the audit touching upon so many key social issues, the flow onto demographics is certain and the housing market may well be impacted, at first indirectly by a possible drop in confidence, but in the long term more directly as demographics, incomes and taxes change.
The audit looks like the first step in an extended agenda of economic reform, and while there may be some unpopular fiscal measures taken in next week’s budget, it does appear that interest rates are set to remain low. Because any increase would boost the dollar and possibly shake consumer sentiment so for the immediate future property will remain attractive due to the long run of low rates.
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How will the Commission of Audit affect the residential housing market?

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Over the past week or so there’s been no shortage of comment on the federal budget. It’s sure to be an ongoing discussion and I would like to look at a few less publicised topics that went under the radar.
The first concerns the search for a new Secretary for the NSW Department of Planning and Environment and whoever this person might end up being, it’s a position we should all be interested in.
Currently the state government’s planning reforms are treading water, and progress which is vital to the development industry is in the hands of the new look cabinet and in particular with the new Planning Minister Pru Goward. Labelled as the biggest shake-up of planning in more than 30 years, the planning overhaul has been in limbo since November 2013.
Under the previous Planning Minister Brad Hazzard, plans remained deadlocked including the key aim of a new fast-tracked development pathway. However there are community and industry concerns about the planning reforms and so the new Secretary and Ms Goward will face a few hurdles.
This newly created position was one of the first steps taken by the Minister and brings together the functions of planning, environment, heritage and local government and as noted in the recruitment advertising calls for candidates able to shape the future of planning and the environment in the state. For many years planning delays and red tape have been seen as holding back the development industry. While according to Meriton’s boss Harry Triguboff, affordability has also been impacted making it harder for first time buyers and inflating prices.
There are many reasons why this role will be keenly watched after applications close on 8 June.
Building Products On The Up
On a related but somewhat different path, only one day after the federal budget was announced a statement from CSR announced a full year net profit of $72.0 million, up a very impressive 143% with a statutory net profit of $88.1 million.
CSR noted that building products earnings increased by 20% with growth across most businesses, and that building approvals for both detached and multi-residential housing continue to grow strongly.  According to CSR this trend is expected to lead to increased demand over the next few years as multi-residential projects near completion and in another positive sign for the industry CSR also notes a solid pipeline of transactions currently under negotiation.
In February, Boral Limited also announced another healthy result with a 73% increase in net profit for the six months ended 31 December 2013. The Building Products division’s significant turnaround was in part due to the tailwind of improving housing construction demand in New South Wales and Western Australia.
The results from CSR and Boral do indicate that a move to see stronger development activity is now starting to take hold. The trend is further underlined by the ASX Materials Index which has increased by 8.34% in the last 12 months, while the related Industries Index has also increased by 9.45% over 12 months.
These figures are important as they point to how successfully we are moving from the resources construction boom. While the Resources Index rose 8.16% over the last 12 months the three-year trend is down 9.11%.
Planning Needs to Get in to Step
The pending appointment of a new planning and environment supremo for NSW and the need for new planning laws to be sorted out, may appear to be some distance from either of the boardrooms of CSR or Boral. However these two news items are linked because they point to the continued transformation of the national economy.
And while I have avoided direct comment on the federal budget, its strong infrastructure focus will no doubt impact CSR, Boral and similar companies and our future new department secretary as well. In a wider context new residential developments will soon come into the picture as planning rules for NSW are re-visited and as the construction sector benefits from strong infrastructure spending.
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The property topics that have flown under the radar

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The idea of multigenerational living (MGL) is not new and in some societies it’s a very old idea, however not so for Australia, although this may be changing.
Looking at the central role design plays in the planning and marketing of new residential developments, I think that we need to consider the more widespread impact of MGL, and its impact is already being felt, even if the changes are still only subtle, at the margins.
In some European and Asian countries MGL is a normal part of the social and housing fabric; in the USA the trend is on the increase mainly in response to economic conditions. In the US social conditions are also changing, shared living sits with shared economic resources and many of the trends are now being mirrored in the Australian housing landscape.
Economic conditions are linked at one end of the market to falling housing affordability and at the other end of the market tied to the insecurity of retirement income. In some parts of the US it is now more common to see parents living with the kids, along with grandparents and younger siblings living with their more financially stable older brothers and sisters. There are varied housing needs in play here across these different generations and this is impacting the size and design of housing stock. In Australia we see the same demographic pressures now starting to come into focus and the recent federal budget has further magnified the trends.
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Multigenerational living responds to many economic and social needs and is a trend that is going to continue to impact the design and demand for housing.
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Here we see pressure on the middle-class, Baby Boomers want to stay living in their homes for as long as they can, while their kids are also staying longer in the family home as they face the hurdles of housing affordability.
Also if baby boomers have to work longer towards their 70’s, then staying in the family home near employment will have an immediate impact. People close to retirement will stay local and the idea of a tree or sea change will be less appealing because of very limited employment options. Working longer and staying connected longer will make it more attractive to share accommodation.
The Security of Proximity
MGL delivers one clear benefit and that is the security of proximity. Grandparents under the same roof as their younger family members is an obvious example, but young couples with kids can also benefit if they have the support of parents and grandparents to help with either ongoing or occasional childcare. This pooling of resources both financial and because of the help of an extended family, even if only for a few years, will also help those saving for a home, and it is hard to argue that MGL will be on the increase driven by the desire to make housing more affordable.
The benefits apply as much to shared rental accommodation as they do to owned property, with the idea of shared rental accommodation taking us back to the past days of young people in a shared house or apartment.
Design Is Already Responding
In Australia MGL is already having an impact, and this will continue to gain pace as the market adjusts to our shifting demographics and economic circumstances. For example go to almost any new housing display village and you will find any number of homes with ‘parent’s or teenage retreats’ and with multiple living zones, and two-way kitchens. The granny flat is now a hotel-like self-contained unit on the ground level of a designer four or five-bedroom home. While more generally house designs are delivering designs that provide different shared spaces that also function to provide the privacy we all crave.
Or consider the options that a three-bedroom dual key apartment might offer a MGL family unit. A two bedroom home for mum and dad and a one bedroom flat for a young adult child, that could one day be homes in the reverse, or a multi-unit investment for the family. Another example I now see is one family buying a number of apartments in the same development to meet the different overlapping needs of different generations.
Multigenerational living responds to many economic and social needs, some long-term other short-term and others that relate to financial security and limitations, however this is a trend that is going to continue to impact the design and demand for housing.
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Multigenerational living: The future impact on design and demand for housing

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NSW Treasurer Andrew Constance has confirmed just how much Sydney’s real estate boom is adding to the general fortunes of the state.
The 2014 budget papers show that "a resurgence in the property market has significantly lifted transfer duties in 2013-14". Transfer duty, including stamp duty, contributed $938 million of state budget revenue. This result was seen as a ‘windfall’ and measures to further stimulate the rate of new home construction were also announced in the budget.
The Treasurer also announced that the threshold for the first home buyer $15,000 grant will be boosted to $750,000 – an increase of $100,000. From 1 July 2014, the NSW government will boost the threshold of the First Home Buyers Grant for new homes by $100,000, which means entry level buyers can spend up to $750,000 on a new property.
However extending this to established homes appears to be totally off the agenda given the level of demand and the increased prices over the last six to 12 months. Still, eligibility for the grant will from 1 July 2014 be restricted only to citizens who are permanent Australian residents.
The NSW government has also pledged to freeing up land supply and speeding the delivery of some infrastructure to help boost construction activity.
Property Plays a Big Part in State’s Economy
However when looking at the government’s revenue papers in the budget, it is easy to see how important a robust property market is. But at the same time the extent of revenue from property and some related areas may be placing too great a burden on the sector.
Comments in the budget also underline how relatively volatile, even fragile this revenue stream can be, and so I think it’s worth looking in more detail at some key points. What we can see is how reliant the government is on this revenue and why any move to abolish stamp duty as part of a possible review of state-based tax reforms looks a long way off, if ever, although remaining mortgage duty is being abolished in 2015.
One of the most telling figures in the revenue statement is the comparison between GST revenue and transfer duty. GST revenue in 2014-15 is estimated at $6.094 billion rising to $6.9 billion in 2017-18. By comparison transfer duty revenue in 2014-15 is estimated at $6.095 billiob but is anticipated to rise more than GST to $7.256 billion in 2017-18. On top of which Land Tax will add $2.4 billion – $2.8 billion in the same time frame, while we should not forget the parking space levy set to reach $115 million by 2017-18 and so adding these figures we see that by 2017-18 direct property related revenue for the state will be some $10.24 billion.
The budget papers do point out that the 2013-14 results were expected to increase by 20.5% but in fact the increase looks set to be closer to 35%. Further the current budget anticipated an increased volume of sales at 6% but the final figure was much more at 18%. And residential property prices have increased by some 10% over the past budget period, however those figures are not expected to be maintained, but any slow down is expected to be gentler than previous cycles. And in the four years to 2017-18 the government is expecting a growth rate of 7% over the four years. In today’s market this looks a conservative estimate.
What Has Been Driving These Figures
The Office of State Revenue might be expected to be conservative in its views, however key facts driving the revenue in 2013-14 have, according to the Office, been: historically low interest rates, pent up demand, under supply, improved consumer confidence and of course the obvious big increase in house prices.
When looking at the impact of house prices, the Office points out that activity was initially driven by sales of less than $600,000 but now strong growth in sales of homes valued over $1.2 million is apparent, however the Offices argues that this trend might also mark a peak in the housing cycle.
A Keen Eye Out for Strong Construction Activity
Given the potential of $10 billion in annual revenue by 2017-18 the government is also keen to keep the recovery in new construction on a robust footing. In the December quarter 2013 private sector dwelling approvals were 44% higher than the decade average, as were dwelling commencements while completion were 14% above the decade average.
The hope is that these strong results will continue over the next 4 years, as this appears vital for the health of NSW. However the reality is that the sector and those home buyers paying stamp duty (and that’s the majority) are doing some heavy lifting when it comes to government revenues and any adjustment to the GST needs to address this reality.
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New South Wales reliant on the property market for revenue

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Over the last 12-18 months investors have become an important part of the target market for most project marketers.
The 2012-13 Annual Report of the NSW Rental Bond Board gives some keen insights to the character of the Sydney rental market. The insights are well worth sharing with investors, developers and marketers alike.
It is estimated that there are some 2.47 million private dwellings in NSW of which 703,158 (when last counted by the Board) are private sector rental properties and there’s a general trend suggesting that soon this will account for almost 30% of housing stock. By any measure the residential rental accommodation is key and seemingly ever more important.
In 2009/10 the Board held some 648,141 bonds or $840 million but in 2012/13 it held 703,158 bonds or $1.043 billion, and since the GFC the number of people in rental accommodation has been on an upward trend with the biggest increase being seen in 2012/13. It is also reasonable to expect that this trend will continue as affordability remains tight and as more new stock is completed and becomes available to rent.
There also appears to be a trend towards longer lease terms. This may in part be directly related to the improved quality of apartments that are now being developed. Investors are now very keen to purchase apartments that offer good quality, this applies to SMSF investors who are looking for long-term income and tenant stability. The sometimes termed ‘rental quality’ is no longer acceptable, as any sort of dumbing down in a development will fall short of investor expectations.
The trend towards longer leases, and hence more security for investors, is seen in some of the Board’s figures. These show that lease terms of between 13 to 24 months are the fastest growing sector of demand and that lease terms beyond 37 months are a very stable part of the market.
Two-year terms are now around 33.5% – a big increase from the level of 23.3% in 2001/02. It also appears that investors are also on a winning trend with more than 91% of bonds returned in full or only with part deductions and only 9.3% of bonds claimed by landlords. Again, I think that this points to an evolving and longer-term rental market, which for some tenants means that renting is less of a stop-gap measure and longer lease terms may also help people save for their own home, while flat-sharing of more expensive properties is also a popular option.
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Sydney’s residential rental accommodation is more important than ever

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Last week a New York real estate listing started making the rounds on Twitter creating a great deal of debate.
The author tweeted: “New barrier breached in NYC real estate? The US$1 million STUDIO.” The New York based broker had listed a 532 square feet (49.4 square metre) studio for almost US$1.1 million (AUD$1.172). What’s more, the particular studio was described in a somewhat down-beat way as “not even in a coveted block!”
The Twitter activity started a conversation about how realistic this claimed ‘record’ was and for my part, back in Australia, and for Sydney in particular, I also find myself asking if the $1 million price benchmark needs to be updated, specifically when it comes to apartment values.
Back to New York for a minute. In reality the listing was not “a new barrier breached” for the city. It’s not even the most expensive studio listed because right now there’s a range of studios from 400 square feet at US$1.05 million to an eye watering US$1.8 million (which last sold in 2009 for US$925,000) for just 689 square feet that’s 64 square metres which is a much more familiar size and price for a quality well-designed one bedroom unit or for some two bedroom units here.
Recently, in just a few hours, Colliers International <a href="/expert-insights/buying/31906-bondi-junction-aqua-off-the-plan-sellout-leaves-buyers-scrambling-to-secure-apartments" target="_blank">sold out Aqua at Bondi Junction</a> where 66 of the 129 apartments were sold for an average of $1,000,000 plus.
Today Sydney has around 170 suburbs with a median house price of $1 million. In fact, one in five Sydney suburbs is a $1 million plus area, which underlies the city wide trend, but this also argues the case for another benchmark to be used to gauge evolving values.
It’s also estimated that half of Sydney’s home owners will find themselves ‘millionaires’ by 2020, by virtue of the fact that an estimated 625,000 houses across the metropolitan area will have a value of more than $1 million, when twenty years ago, we weren’t even at $200,000.
Prices, even for some prime one bedroom apartments are now, as the Bondi Junction example shows, long past the $1 million price point. At Sydney’s Barangaroo that price has been achieved for an off the plan one bedroom apartment with parking at around 60 square meters, ($16,600 per square metre). While at just below this price a 60 square metres one bedroom apartment on level 36 at The Cove, on Harrington Street The Rocks could today be purchased at $950,000, ($15,833 per square metre).
Many if not most buyers are now very comfortable with per square metre rates being used to underpin process. And for apartments, that might be a much better city-wide guide than the $1 million sale price measure.
The use of a rate per square metre I think better reflects the location, quality and facilities of individual apartments and also gives a more accurate reflection of the total project. We also need to try and more fully factor in the big leap forward in quality and design that apartments in 2014 now deliver. There has been a massive increase in quality, finishes and design and we also need to better reflect location and building facilities and there is sound reason to suggest that a rate per sqm benchmark would do this.
Otherwise like the New York example demonstrates, the raw price can give a flawed or even misleading impression.
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Peter Chittenden

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