The new Newman government is starting to make decisions and trying to get the construction sector going, but are they making it too hard?
BURSTING out of the shed with a stimulus for the fourth pillar of the economy, the new Government’s announcement of plans to redevelop the government accommodation precinct took most of us by surprise.
It wasn’t on any 100-day plan in a ministerial charter letter and at first glance, looks an awkward fit with a cost-of-living and frontline services government agenda.
Having said that, if it is to be, then the Government needs to be confident that it can conceive, scope and run a process for a project that leads to a transaction strongly resembling the one for which they invited submissions in the first place.
For the past 10 years, the property development industry has suffered at the hands of the previous government, being asked to spend millions of dollars responding to government-sponsored bids only to have the process scuttled or worse, wither slowly and expensively on the vine before dying an unrecompensed death without a decision being made.
Tenancy and privatisation offerings at Bowen Hills, Gold Coast Cruise Terminal, Coorparoo TOD, and – don’t mention the war – North Bank, have been failed government processes that have sapped the will of the private sector.
Any executive in a large property group looking to bid for transactions of this scale will report to an executive committee and board located in, most commonly, Sydney or perhaps Melbourne or overseas not Ipwich or southeast Queensland.
Besides the leap of faith needed for such a remote board to approve significant expenditure on a bid in which they are one of five or six, it is critical that they can believe the competition itself will prevail through to a transaction for the lucky one.
Government will always have the lowest cost of funds and the private sector will always seek a development margin for the whole-of-life risks inherent in developing a very large single tenant building of this quality.
Respondents to a bid process asking for an offer expressed as a rent per square metre will seek a 15 to 20-year term and yes, this does start to look like a mortgage, which in the past has led the discussion back to who has the cheapest source of funds and so on.
With the William St to Ipwich River precinct, there are also many significant and long-standing departmental positions on turf and technical threshold issues that only the state can resolve through internal machinations.
It is entirely unreasonable and unrealistic to expect the private sector to resolve these in or after a bid process. They need resolution as part of the project brief.
These knowns should be acknowledged, dealt with and resolved in the structure of offers sought via the RFP (request for proposal) process or the errors of the past government may be repeated. When a formal bid process crashes, everyone loses.
The current expressions-of-interest process instigated for the William St precinct has got off to a pretty woolly start. When the process does hit the formal bid phase, we all need the RFP for William St and any associated precinct to deliver a set of well-defined technical requirements and exhibit a transaction design, land tenure, title and lease covenant that collectively describe a project that is both doable for government and bankable for the private sector.
At least then the lucky six or so shortlisted bidders risking up to $1 million each on a bid, can concentrate on providing options for a single piece and not a mixed bag of fruit.
There are many varieties of apple on the market, but at least we can clearly ask for an apple. A process that permits exotic star fruit or that southern favourite, the seedy cantaloupe, will be hard to successfully complete.
* James Basham is a director of DMA Partners
Article published on the couriermail.com.au on June 21 2012
Sunshine Coast had Queensland’s top house price growth in Spring: CoreLogic’s Q3 Regional Report
The Sunshine Coast was one of the strongest regional housing markets in Queensland over the last 12 months, the Q3 Regional Report from property data firm CoreLogic has found.
House values were up 8.1 per cent over the year to October.
They were driven by houses in the upper quartile, whose values were up 9.2 per cent compared to the lower quartile’s 7.4 per cent gains.
The number of house sales were up 8.1 per cent over the last 12 months compared to the 12 months prior. That spike was primarily driven by sales in the $200,000 to $400,000 bracket, which up 36.1 per cent.
Unit sales were slightly up for the region, just 1.4 per cent, driven by the $400,000 to $600,000 market which saw a 36.9 per cent sales spike.
Unit values saw an large increase, up 4.5 per cent.
It was the upper quartile that vastly outperformed the lower quartile for apartments, up 6.1 per cent compared to 2.5 per cent for the lower quartile.
The time on market for houses in now 47 days, compared to 53 days last year.
Units are also getting snapped up at a similar pace to 12 months ago, now at 50 days down from 61.
CoreLogic’s head of Australian research Eliza Owen said the traditional draw cards for regional dwelling markets such as lower density levels and lower purchase prices, coupled with the normalisation of working from home, have sparked increased interest among researchers.
“The results of this report support increasing levels of demand outside of cities. Regional Australia’s dwelling markets had higher rates of growth relative to capital cities through the pandemic,” Owen said.
“In the year to October, combined regional Australian dwelling markets rose 4.8 per cent, compared with a 3.9 per cent lift in the capital cities.
“Migration numbers from the ABS show net internal migration to the regions rose to a record high in the June quarter. This was because movements to regional Australia increased, while departures from the regions slowed. As a result, demand for dwellings in regional Australia will have risen at a time when the stock available for sale is relatively low.
“‘Commutable’ regional areas within a reasonable travel distance to the major metropolitan centres have seen particularly extraordinary increases in demand. House sales volumes increased by double digits across the mid north coast, Illawarra and the Hunter Valley.
“Of the 50 house and unit markets analysed, only six markets continued to show declines over the year, including markets far from metropolitans such as Riverina houses, Cairns units and units in Central Queensland.
“With record low mortgage rates and confidence returning to the Australian economy, there is likely to be a broader-based upswing across both regional and capital city markets into the first quarter of 2021,” said Ms Owen.
However, while the story seems largely positive for regional Australia’s residential property market, there is a downside.
“For local first home buyers, declining affordability may become a problem. Growth may start to slow in regions that have already seen a sustained upswing, due to such affordability constraints. These include areas such as Illawarra, Newcastle and Lake Macquarie, the Gold Coast and the Sunshine Coast, where annual growth rates in houses have already exceeded 7 per cent in the year to October,” concluded Ms Owen.
Article Source: propertyobserver.com.au
House price falls, recession prompt BoQ to increase bad loan provisions
House prices could fall by as much as 12.5 per cent this financial year under the most severe case scenario modelled by the Bank of Queensland that has prompted it to increase its provision for bad loans to $175 million as it braces for a longer and deeper recession.
Investors punished the bank on Tuesday causing the share price to slide by more than 7 per cent after revised modelling factored in the impact of mounting unemployment, sliding property prices and negative gross domestic product on BoQ’s loan book.
BoQ has already been the most exposed bank to loan deferrals, according to data released by the Australian Prudential Regulation Authority, with 12 per cent of home owners and 16 per cent of small business customers applying for loan relief.
The provision for loan impairments, up from $28 million in April, was based on new economic assumptions using Reserve Bank of Australia and internal data. The base case scenario predicts GDP will contract by 6 per cent, unemployment will reach 10 per cent, residential property prices will fall by 6 per cent and commercial property by 10 per cent this year.
On the most severe scenario, weighted by the bank as having a 5 per cent probability, GDP will contract by as much as 9 per cent, unemployment will reach 12 per cent, residential property prices will fall by 12.5 per cent and commercial property by 20 per cent this year.
Chief executive George Frazis said the revised provision reflects the impact of the virus but was pleased that a quarter of the bank’s customers who applied for loan relief had started making full or partial repayments.
“As we all know, this has been an unprecedented year and BoQ is committed to supporting our customers throughout this period. We are very pleased to see many of our customers returning to work and reopening their businesses and will continue to work closely with those that require further assistance,” Mr Frazis said.
Evans and Partners banking analyst Matthew Wilson said he was not surprised by the changes to BoQ’s loan impairment provision, saying he had forecast bad debts of $219 million.
Mr Wilson said the bank’s underlying assumptions were “rather bullish” as they relied heavily on the base case assumption, with only 20 per cent probability afforded the downside scenario and 5 per cent to the severe.
BOQ also announced it had conducted an audit of employee remuneration and found $2.4 million in superannuation had not been paid properly. The bank has set aside $11 million for wage issues and said it is still investigating the matter.
The Finance Sector Union national secretary Julia Angrisano said 750 staff would have to wait until March next year to be repaid, adding this was “not acceptable”. “This is wage theft and we are calling on the Bank of Queensland to accelerate the repayment program to pay affected employees immediately,” Ms Angrisano said.
Mr Frazis apologised for the errors and committed to contacting all impacted employees in the coming months. “We will get this right and we will make sure our people, past and present receive every cent they are owed. This is an absolute priority,” he said.
Mr Frazis did not provide an update on whether the bank would pay shareholders a dividend this year, only to say he realised how important the payments are to retail investors.
“We have completed our scenario analysis in relation to dividends and have consulted with APRA in line with the guidance issued on July 29, 2020. The board will make a determination on dividends in relation to FY20 at our full-year results,” Mr Frazis said.
BOQ’s full-year results will be announced on October 14.
Mr Wilson said he did not expect the bank to pay shareholders a dividend. “BOQ has much on its plate, rebuild the IT platform, rebuild the culture and grow.”
Morningstar analyst Nathan Zaia said BOQ’s deferred loan book was on the “upper end of the market” and predicted cuts to JobKeeper would put further pressure on the banks.
“The government is hoping that as they reduce JobKeeper, more of those jobs will come back so they offset each other,” he said. “But I don’t think that’s going to happen. I think we’re going to have a period where there’s more people doing it tough.”
BOQ’s share price closed at $5.89.
Stockland Submits Plans for $388m Greenfield Project
Stockland has submitted an application for a $388 million Caboolture West residential development of a substantial 175-hectare parcel of land.
The application seeks subdivision approval for the first precinct—206 lots of a total 1,939 dwellings—planned for 60-172 and 67-177 Litherland Road, Upper Caboolture as well as establishing the intent of future development over the next 30 years.
There are five precincts planned for the site located 51km north of Brisbane, including a residential care facility, child care centre, club, educational establishment, hardware shop, businesses, office, place of worship, retirement facility and restaurants.
Meanwhile the ASX-listed group has removed its lot and revenue projections for the nearby Twin Waters West development which was refused by council on 23 July.
The two developments are part of Stockland’s 6,285-lot Queensland development pipeline, which also includes a $541 million development at Ellida, Rockhampton, a $65 million project at Hope Island, Gold Coast and a $585 million community at Paradise Waters, Deebing Heights.
Stockland acquired the Caboolture West development site in 2008 within the emerging community zone in the Moreton Bay Regional Council district.
The project is specifically designed to promote an active lifestyle-based sustainable community, leveraging a significant open space network including Caboolture River and Small Creek, according to the development application.
“An integrated convenience, community and district sporting area completes the vision aimed at providing a benchmark in residential development within the Caboolture West expansion area and in proximity to the Morayfield and Caboolture CBD.”
Around 24 per cent of the site will be dedicated to the conservation of natural habitats as well as a network of passive open space areas.
“The proposed development includes rehabilitation and offset planting of key areas and proposes revegetation of the Caboolture River Creek environmental corridor to provide a flora and fauna passage ,” the application states.
“Other vegetated areas along Litherland Road are intended to be preserved within an offset sub-arterial road corridor design.”
House and land sales improvements as a result of new government stimulus packages have sparked something of a mini-boom in Australia, improving the outlook for Stockland and other REITs in recent times.
Despite this Stockland’s overall performance has been impacted by its retail portfolio which has suffered due to ongoing restrictions and the bricks and mortar downturn.
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