EXCLUSIVE
With Australia’s solid vaccination figures, finance and property development specialists are buoyant about the market in 2022.
Andrew Schwartz, group managing director and co-founder of Qualitas, says the vaccination levels are a good sign of what’s ahead.
"You’re not going to get some sort of mutation that puts us all back in our houses for another year and in the absence of that, it’s time to start focusing on the post-COVID environment where people have high levels of vaccination rates in Australia, in excess of 90% and you’ve got medication that can treat the virus as well. People are regaining confidence emerging out of their houses,” Schwartz said.
Schwartz said confidence was now building with people wanting to get back and access physical retail and get back to their office. At the same time, there was the prospect of borders re-opening, creating a demand for property in the residential sector.
This coincides with Deloitte’s Retailers Christmas Survey 2021, which puts its faith in the consumer more than any other time in the survey’s 10-year history, as the country emerges from COVID-induced lockdowns with a spring in its step. The survey report assesses retailer sentiment for the approaching Christmas period, and identifies key trends, expectations and priorities for Australian retailers for 2022. Key survey findings include:
> 80% of retailers expect to see sales growth in 2021, up 20 percentage points from 2020
> 52% expect sales to bounce back rapidly post lockdowns
> 42% believe new product ranges and personalised marketing will be the most important focus areas to boost sales
> 60% say more than half of their Christmas sales will be digitally enabled in some way
> 55% are concerned (and 26% very concerned) about receiving sufficient stock for Christmas
> 72% highlight shipping costs as having a material impact on their input costs
> Nearly 90% expect trading conditions to improve (or stay the same) over the next 12 months.
While there is the prospect of the RBA raising interest rates, Schwartz said that was generally a function of an economy doing well. He said with the modest size of the interest rate increases and the significant buffers that the banks had in place, borrower insolvency and mortgage distress were unlikely.
Nor did he accept predications from some economists that a rate rise would send force down property values.
“It can be overplayed and I think you’ve got to remember that the current housing market in the major cities is in equilibrium. You didn’t see significant oversupply leading into COVID and we haven’t had a lot of construction during COVID.
“We’re yet to see the borders re-open and the effect of migration on the housing market.”
Rob Morrison, a founding partner of Barwon with the responsibility for Barwon’s investment business concurs.
He said the signs of inflation creeping through and the prospect of interest rate rises will be counteracted by a more positive consumer environment, a stronger economy and investors and developers prepared to put their money to work and invest capital.
“I think we will bounce out of the summer break with a lot of momentum and I think that’s going to be good for the property market, good property developers and good for investors,” Morrison said.
“It will be good for demand for office space and for retailers as they get back into the swing of retailing. And it will be good for hotel market where businesses are going to start to travel again, albeit cautiously. It will be good for the tourism market in terms of holidays and caravan parks and leisure opportunities”
He said he would be surprised if a small increase in interest rates will put a blanket on the economic recovery.
“The business outlook story, the economy story will be a stronger influence in investment decisions than a near term adjustment in interest rates,” he said.
He saw people returning to the office after Christmas which will give rents a push although the market still had to adjust to the post-COVID work environment.
“The office market is still going to be feeling its way as people work out how they’re going to work going forward,” he said.
“How many days a week will they be in the office? How many days a week are they going to be working from home? How many Zoom calls are they going to be doing in a typical week?
“There is still a lot to play out there and I do think office rents may be under pressure for the near term as those workplace habits or workplace trends are settled down. The jury is still out on the workplace environment looks like at the end of this year.”
Michael Lasky, the executive chairman of Lascorp, which specialises in retail projects, said the retail property market had been “enormously strong” during the COVID period and saw this continuing as a vaccinated economy emerged from the pandemic.
Bill Moss, the executive chairman of Boston Global, said one of the big issues ahead for developers is the way they embrace technology.to get a competitive advantage.
“Today any really good development company has got to be on top of changing technology not only in building but also in supply chains right across the spectrum of systems that work in building and development organisations. You build your product better, quicker, safer, that applies to every part of the building industry,” Moss said.
