There Is A Lot Going On.
As the six-word title slide of his keynote presentation flashed onto the screen, Urbis director Paul Riga could feel the collective thought bubble popping up in the room.
It was quite an understatement, to say the least.
To be fair, however, and as Riga quickly pointed out, emphasis was given to the third and fourth words.
“I’ve underlined the ‘a lot’ bit because there is a fair bit happening right now and that’s probably an understatement in itself,” he said.
The irony of the title’s succinctness and simplicity also was not lost on the gathering of 300 industry players at The Urban Developer Brisbane Residential Developer Summit.
Things have got somewhat chaotic and complicated in the Queensland capital’s development sector of late.
The city’s to-do list—with the 2032 Brisbane Olympics the cherry on top—is undeniably enviable but somewhat of a blessing and a curse in the current challenging and uncertain environment.
“There’s all these things happening and it is a lot going through people’s minds,” Riga said. “But I guess sometimes it’s easy to forget that the fundamentals for pure residential property demand are still relatively strong.”
State government forecasts for population growth indicate at least 190,000 new residents will be coming into the Brisbane LGA by 2036.
“That’s a lot of people that we’re needing to house,” Riga said. “And depending on how you cut that figure in terms of persons per household, it could be anywhere between 70,000 and 100,000 homes required over that period. That’s 7000 to 7500 homes we need to deliver per annum.
“Then there’s other factors that are coming in and—while again we look at these and say ‘fantastic’ from the perspective of investment, creating opportunity, creating jobs and therefore pulling people into our region—they do perhaps provide some challenges in construction and delivery of our residential homes.”
Specifically, he cited a combined $24.7-billion-plus, resource-sucking pipeline—focused largely in the state’s south-east—including healthcare-hospital and transport infrastructure as well as the delivery race to get the city match fit to stage the XXXV Olympiad.
Overlaying all of that is a worsening housing supply and affordability “emergency”, as Riga described it, compounded by ongoing escalation in building costs and a demand-driven crunch that has maxed-out the city’s construction capacity due to a critical shortage of skilled labour.
According to Riga, overall unemployment was low but construction unemployment was “even tighter”—with estimates currently sitting at about 2 per cent.
Quantity surveyor and Mitchell Brandtman partner Caitlin Shields told the summit that construction cost escalation—by its estimates, forecast to rise on average a further 7.5 per cent over the next 12 months across south-east Queensland—was “all about the labour now”.
“We’ve got to figure out this labour problem … and opening up migration internationally should help a little bit.
“There’s a famous quote that says ‘build it and they will come’ but maybe we should be saying ‘they will come and they need to build it’.
“So, hopefully we’ll end up with some more skilled labour because we’re lacking in that regard.”
Shields said with the additional pressure of rising inflation and interest rates, the industry was “at a turning point where sales are cooling off a bit and the feasibilities are starting to get challenged”.
The trend, according to Riga, was reinforced by the lastest data—particularly in the last quarter—that showed “supply is starting to drop off”.
“And it’s not looking like it’s going to come back in the next 12 months to figures where we probably need them to be,” he said.
Nevertheless, both he and Shields agreed there were opportunities to be had for developers going forward.
Riga said the medium-term outlook for Brisbane and Queensland’s south-east was a “tale of two markets”—the rising build-to-rent sector and the premium boutique-scale apartment market.
“We know from clients there’s significant [build-to-rent] interest here in SEQ, given the complete lack of supply that we’ve got going in the market.
“That product typology in itself has the ability to supply markets relatively quickly … not necessarily within the next 12 months, which is potentially when we need some of that supply, but it will come on and supply the market in time.
“And over the next 10 years there’s a potential depth of market just within inner-Brisbane of 25,000 to 30,000 new renters … so there’s quite a market there.”
Meanwhile, activity was expected to continue in the top end of the boutique multi-residential market because “from a price point, there’s a bit more tolerance from a buyer perspective, less reliance on interest rate movements and affordability caps to enter that market”.
Nevertheless, Riga said, innovation, collaboration and partnerships would be needed across the board to deliver projects in the next 12 months and beyond.
“We’re already seeing that happening and, ultimately, for us to be able to potentially move from the emergency we’re in from a housing supply perspective a lot more of that will be required.
“So, there are definitely opportunities out there. But it’s getting on top of some of those constraints that is going to be key.”
Yes, there is a lot going on in Brisbane market and—judging from Shields’ final words of advice to the summit delegates—clearly much more to come.
“Hold on for the ride,” she said “There’s a lot of excitement, there’s a lot of activity and there’s a lot of challenges out there.”
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