Amanda Steele
I think there's a lot there that we can learn about challenging the way we lead into the future in property and looking widely at how we can adapt and adopt new leadership styles so that we're better set up.
Kathryn House
That's Amanda Steele, ISPT's Group Executive, Head of Property.
Mike Zorbas
Let's stand back for a moment. I think we should give ourselves a big old national clap, to be honest. After decades of neglect on housing supply, both Labor and Liberal in the last few years have moved each of their parties into a place where they're dedicating more brain power, spending more money to bring on new supply. And that's more than they've done in our lifetimes.
Kathryn House
And that's Mike Zorbas, CEO of the Property Council of Australia. And I'm Kathryn House, your Talking Property podcast host. I spoke to Amanda Steele and Mike Zorbas following the Property Council of Australia's annual Property Congress in Townsville, which I attended last month to find out what's top of mind for the industry's key decision makers. Earlier this month, we issued our first Congress podcast featuring Simon Kuestenmacher, a prolific and very entertaining commentator on demographic and societal trends. If you haven't had a chance to tune in, it's worth a listen. In this second episode, I get the view from the top from Congress panelist Amanda and a pulse check from Mike on some of the key industry issues and Congress takeouts. Amanda and Mike touch on everything from why we're likely to see more property investment activity next year, how we can improve the attractiveness of Australia for global capital, what's needed to tackle the current property skills shortage, and whether we're shifting the dial on the current housing crisis. Here's our conversation.
Kathryn House
Amanda, great to have you join Talking Property.
Amanda Steele
Great to be here. Thank you, Kathryn.
Kathryn House
And Mike, great to have you on the program as well.
Mike Zorbas
Thanks for having us, Kathryn.
Kathryn House
Amanda, you talked in your View from the Top session about the fact that 2025 will likely be marked by heightened dealmaking and market movement. And you weren't alone. Mirvac's Campbell Hanon talked about a ripple effect next year, due to a likely easing in interest rates and costs. And Charter Hall’s Carmel Hourigan said that we might look back on 2023 as a period of rare opportunity in some Australian property sectors. So, Amanda, what do you think is going to drive a pickup in investment activity next year?
Amanda Steele
Well, Kathryn, isn't it lovely to be talking positively about investment opportunities next year?
Kathryn House
About time.
Amanda Steele
I know, but I am quite positive about where we're going to get to next year. I think the positivity is there because the expected rate cuts, valuations stabilising as borrowing costs decrease and of course that market liquidity improves. I think that investors overall are really seeing risk return prospects, particularly in those core real estate assets. So I feel positive about what's coming. I feel like there is everyone waiting with anticipation. Lots of people are talking about deals that they would like to do and I'm hopeful that those flood gates will open next year.
Kathryn House
Yes, it's like we're waiting at the gates.
Amanda Steele
Yes.
Kathryn House
I also noticed on the panel that they used talking about particularly strong interest in Australia from foreign investors. And you described Australia as a Hugh Jackman triple threat. I loved that. Talk us through what you meant by that.
Amanda Steele
Well, let me talk through Hugh Jackman first. So, you know, Hugh Jackman is the triple threat. He can sing, he can dance, he can act. I think for us, the triple threat of Australia is that we've got this incredible ESG fundamentals that's really attractive to overseas investors. We've got this amazing population growth and we've got this very stable rule of law. So I was recently overseas speaking to European investors and our business has been speaking to a lot of international investors. They see those three elements as very positive, very strong investment thesis for why they'd want to invest in Australia. They have allocations for APAC, and they see those allocations strongly around Japan and Australia. But that population growth and that immigration growth in Australia is a really good news story. It was music to my ears, speaking to those international investors on just the opportunity that they saw in this market.
Kathryn House
I bet. And you're seeing that as still a little bit stronger than even domestic capital?
Amanda Steele
Yes, so interestingly, it's very Australian, isn't it? We're our own worst critics. That Tall Poppy Syndrome is absolutely present and I find the sentiment more positive overseas. Maybe they want to visit our great weather?
Kathryn House
Yes, they need a tax write off.
Amanda Steele
Totally, I get it. No, I really think that our local investors are cautious. They're looking to overseas to see where the moves will start. There's been some interesting decisions in America and in London in the property space. So I think that the local domestic investors are a little more cautious than what we're seeing from the internationals who see this as a great opportunity. We're comparing ourselves with ourselves when we look at our domestic investors and when you look broader, when you look overseas at where we're sitting compared to our international colleagues, we're in a really good position.
Kathryn House
There was talk on the panel, though, about potential sovereign risk, particularly as it relates to recent tax changes, Is that making foreign investors nervous?
Amanda Steele
There are some geographies that foreign investors will not touch. And I think we can all be really transparent that some of those tax increases in Victoria are a real challenge. So they're a very sophisticated population, international investors, so when you talk to them about placement of capital, first off, consistently we're told "nothing in Victoria. We're not doing Victoria, it's not of interest to us". And those increases in taxes and the sporadic increases in taxes lead to an inconsistency. So, Victoria's not alone there. Across the board, we've had increases in taxes that are unpalatable to foreign investors. I think Victoria has had more than most. But if you look at that foreign purchaser duty land tax, in New South Wales, it's about to be 5%. In 2017, it was 0.75%. So that's a massive increase. And I think that some of the states that are more sophisticated around foreign investment recognise that and are trying to manage that. But what would be great, if we had a consistency and approach, it would give us a far wider investment playfield and it would really give the confidence that the international investors are looking for placement of capital.
Kathryn House
And Mike, what are your thoughts on sovereign risk and what do you think could/should be done to further improve the attractiveness of Australia? It was interesting listening to former Australian Treasurer Peter Costello's keynote, where he said we need certainty and simplification when it comes to taxation and that we're still trailing when it comes to monetary policy. What are your thoughts?
Mike Zorbas
Well, Peter Costello has a point, doesn't he? I mean, Australia screens well. Population growth, good product, good industry leaders, reliable institutions. But you can't take these features for granted. And if we do keep interfering with actual investment returns, we are going to interfere with something which has really served Australia well over the decades, that very much needed overseas investment in our great Australian cities. So you can't keep introducing and changing taxes as the last Queensland government did or the current Victorian government are doing. Indeed, have turned into an art form, and expect investors not to notice or to feel like their investments are not more welcome overseas. And that's where we need to really take a look at the sort of welcome mat that we're putting out for a very competitive investment landscape globally.
Kathryn House
Yes. I mean, because we're competing against countries. I think Japan was one of the markets that came up as another particularly attractive APAC market. So we do need to be careful about how we're, you know what we're projecting to these global investors.
Mike Zorbas
Absolutely.
Kathryn House
Continuing on the Costello theme, he also talked about our ageing population at a time when there seems to be bipartisan political support for cutting immigration. Amanda, you shared some interesting views on the fact that Australia has a population barbell. Will this create opportunities for the property sector?
Amanda Steele
Yes, where there's risk, there's always opportunity, Kathryn. And we do have that barbell. We actually have a growing population, birth population, which is incredible in the OECD countries that we compete with and we have an aging population. So when you look at that barbell with a young population and an ageing population, you see opportunity in property around seniors living, around education and everything that goes around those sociodemographic figures as a result. So there definitely is an opportunity. And the more that we can get that stability that Peter Costello spoke about, particularly in the taxation regime, the more opportunity there will be for investment.
Kathryn House
And continuing on the immigration front, you shared one of your views about shorts versus suits.
Amanda Steele
Yes.
Kathryn House
Can you tell our listeners...
Amanda Steele
Not safari suits.
Kathryn House
Safari suits. So tell our listeners, what did you mean by shorts versus suits?
Amanda Steele
So we have a great immigration story to tell. We have high immigration numbers coming into Australia. When you really look down into the population that are coming in, there's still a lack in some of the key services that Australia doesn't have. And the Master Builders Association has spoken about it and written about it very eloquently. We have a very small number of construction workers coming in and when you go deeper into those construction workers, they're engineers and architects. So we have suits that are coming in and actually what we need is people with shorts and hammers to actually build and respond to that housing crisis that we're currently in. There's a huge lack of construction workers. It has been a big challenge in development. It has driven costs, and the reliability of delivery has been a real challenge recently. I think that those immigration numbers should be more forensically examined so that we address that challenge. More shorts, less suits.
Kathryn House
Thanks, Amanda. Well, Mike, I'd love to get your thoughts on this one also.
Mike Zorbas
I think the immigration debate is a bit of a pre-election fake out to be honest. Australia needs immigration. We've got skills gaps, we need to fill them. We need more people to build our infrastructure and housing and TAFE can't fill that gap. We've only had 1.8% of migrants over the last 20 years who've been hypothecated to immigration. That's a crazy low number given the mega projects and energy transition we need to deliver. So as more of us leave the workforce, we need more people to come in and form the productive tax base of the nation. We're growing older, we're going to need more people to look after us. The list goes on really there. But it's also borne out by the Intergenerational Report which Peter Costello actually kicked off when he was Treasurer. Every couple of years Treasury throws together the big megatrends and the mega challenges that we face. And every few years they do say these same things to us. We are getting older. We do need more people in our tax base in order to support those of us as part of an ageing demographic. This is a no brainer. A post-election Australia will see a big emphasis by whoever is in government on bringing in the right skills across the board.
Kathryn House
And I guess another of this year's perennial topics has been the housing debate. From the 1.2 million new homes target, to stalled BTR legislation to the student visa cap. And the housing crisis was certainly high on the agenda at conference. I found it was interesting to hear one of the presenters saying that there was no short-term fix and that it could be three to four years before we see real change. That said, we have seen some interesting announcements post Congress including a $900 million Federal Government National Productivity Fund for states and territories to streamline building approvals and enact other housing reforms. So Mike, are we shifting the dial at all?
Mike Zorbas
It's a great question, Kathryn. I mean, let's stand back for a moment. I think we should give ourselves a big old national clap, to be honest. After decades of neglect on housing supply, both Labor and Liberal in the last few years have moved each of their parties into a place where they're dedicating more brain power, spending more money to bring on new supply, not just in social housing but in the market as a whole. And that's more than they've done in our lifetimes. There's a bold target, 1.2 million homes on the table. There's carrot and stick for state and local governments as you mentioned then, they're trying to make their planning systems match fit again. That wouldn't have happened without Federal intervention of the kind we've seen in the last two years. And remember too that that deficit that we face, we should have actually built 1.3 million more homes than we have to 2021 if we'd just been as match fit on housing supply as we were in the 20 years to 2001. So something has gone wrong. We've taken our eye off the ball, we've become lethargic about planning regimes and approvals and the way in which we zone land and the way in which we plan our cities. And that is starting to change. We are starting to see a real focus at that appropriate national level for last mile infrastructure funding, for more Commonwealth rent assistance, and again, for those carrots and sticks for good planning regimes. So there's some good stuff there. And yes, it will take a while, but I do think it's a positive start.
Kathryn House
Well, that's good to hear. So, continuing on the residential theme, Amanda, one of the things you talked about on the panel that struck a chord with me was how home ownership is being politicised?
Amanda Steele
Yes. It makes me sad. It's always amazing to me what can be politicised. Used to be climate change. You know, when you look at how you're protecting the environment, how on earth could that be a political issue? Similarly, with housing. So, disappointingly, I feel like we've got this polarity in opinions in the political parties, and it's gotten right down to Australians should own a house, not rent a house. And I find that extraordinary because we just need a lot of diversity in the housing supply. We're not in the luxury stage of determining whether or not we can just have houses to be owned or rented. We need everything in between. So I think that that politicisation of housing and home ownership needs to be really avoided. This should be a bipartisan issue that's solved across government.
Kathryn House
Absolutely. Mike, any views on that front?
Mike Zorbas
Look, I think if you ask people in the privacy of their own cloistered garden, do they want to own a home? They probably do. The vast majority, more than nine in 10 Australians, would ultimately want to own a home. But is living in a rental property a perfectly sound way to spend your life as well? Yes, it is. So we need to provide choice. We need to give people different types of dwelling to suit the different age groups of their lives, whether that's Purpose Built Student Accommodation or Retirement Living communities. We need to give them the choice to rent should they so wish, and different types of rental choice within that. Whether or not that's individual landlords or whether that's institutional investors through a Build to Rent housing scheme of the kind that in the northern hemisphere is called Multifamily. These are all options that should be put on the table. And we want as much variety as we can get, preferably as close to opportunity and to transport and to employment and education as we can get. And that, I think, is increasingly a focus for state governments, how do we maximise the infrastructure we've already got on the ground? And so, I'd like to try and move us out of that politicised view of housing and towards acknowledging that while the vast majority of people will want to own, there is definitely a place, particularly while you're saving up for the future, in renting, which may well end up being a lifetime choice for many. And they should be celebrated for making that choice, as long as we've provided them with a choice.
Kathryn House
And particularly when you look at statistics like the fact that in Sydney, you know, the average age of the first homeowner is 38, I think it is. So, you know, you've got to provide options for people in the lead up to that.
Mike Zorbas
Very much so. And it's very similar in Melbourne. These trends have certainly not just been Australian either. Although, as I would hasten to point out, we are particularly land rich. We are particularly wealthy as a nation. And so it is surprising, given our small population of 27 million, which is not even in the top 50 globally, that we have the same housing challenges that many land constrained, much poorer northern hemisphere countries have. And that's where I think we owe it to ourselves to do better.
Kathryn House
Yes, I agree. So, in a bit of a change of gear, one of the questions from the audience on your session, Amanda, was about AI and technology. So I guess a question for you both about where you see the opportunities and the challenges when it comes to AI and technology. Mike, perhaps you could kick us off.
Kathryn House
Broad topic. [laugh}
Mike Zorbas
[Laughs] Yes, it is. I was going to say I was leaping into the pragmatic response. It is a broad topic. We do have an AI and Asset Tech roundtable, so the Property Council sees that opportunity and knows that there will be regulation and a great deal of learning and consensus required in our industry as the scale of that opportunity unfolds. The reason AI and other tech is going to be so transformative in the same way as landlines becoming smartphones has been transformative in our lives, is those additional sources of intelligent analysis of how we, each individually and our organisations can work better and do more, is a radical productivity booster. And we haven't even begun to touch the sides on what that will do in our future workplaces. But, certainly, we want to be there with our members as they investigate these challenges and also as I think they face more and more regulation in this area, we're seeing a large degree of interest in all matters Internet out of this Federal Government. And that will continue, I think, at a national level. But also potentially at a state level. So we will need to really see how security, how privacy, and how the productive opportunities of the Internet, as it's broadly spoken of, all come together much more rapidly with AI overlaid across all of them.
Kathryn House
So, Amanda, Mike mentioned productivity. What are you seeing in the AI and tech space?
Amanda Steele
So, it should absolutely be wrapped around productivity. And Mike's right. You know, the productivity of AI and if we're smart about it, it can really free up some higher quality resources to do higher quality work. The opportunity in property, of course, is data centres, and that's such a hot topic at the moment. But let's be smart about how we look at the data centre supply and the challenge we have of infrastructure, both energy and water, of which data centres are very high users. So there's an opportunity there for some smart ESG thinking and planning, but also an opportunity and a challenge for us in dealing with access to infrastructure. I think AI in the property space will hugely transform the way we deliver and speed up the efficiency in how we deliver. I think the challenge for us in property is that we have always been slow in technology. The AI space has been in place for a significant amount of time in finance and insurance, and we're still getting there in property. So I think what the challenge and opportunity is for us there is that we bring in people from outside of industry. And aren't we terrible at that, Kathryn?
Kathryn House
Yes, we are [laughs] and we shouldn't be.
Amanda Steele
We're so connected to relationships, and we get wrapped up around, "oh, that person hasn't been a property before". We need technologists coming in with translators from property so that we're really taking advantage of the efficiency that AI can provide us into the future.
Kathryn House
Absolutely. So, one last question. I'd love to hear from both of you your key Congress takeaway. Mike, perhaps I could start with you.
Mike Zorbas
I think our new Property Council President Carmel Hourigan's observation, actually that volatility is persistent reality, leads us to think that we should actually be prepared for inevitable change. Every year that we remain in the workforce, there is going to be flux and that is going to require a growth mindset, adaptability, and I think a sense of optimism, knowing that we as a nation have advantages over others, but also that our industry has a vital role to play and is better led, in my view, than many others. So, there's a lot of opportunity ahead and we should work with governments and communities to unlock it.
Kathryn House
And Amanda, what was your key takeaway?
Amanda Steele
Well, look, it was Mike's party, Congress, of course, but it was fantastic and really great speakers and fantastic discussion. I think the key takeaway for me was listening to Peter Costello, Peter Dutton, Jonathan Thurston, Cathy Freeman, all of those leaders and the incredible shift that we're seeing in the sociopolitical space at the moment. We're seeing that in America and Europe and the Middle East. And what's really clear is that globally there's a need for new types of leadership, that that political system is not working for the young people coming through. They don't see a solution in the traditional political systems and parties. And when you look at that incredibly creative leadership that are looking at new ways of solving, like Johnathan Thurston, like Cathy Freeman, I think there's a lot there that we can learn about challenging the way we lead into the future in property and looking widely at how we can adapt and adopt new leadership styles so that we're better set up for the future.
Kathryn House
Oh, I love that. Thank you so much, Amanda, for joining Talking Property. I really love the idea that we really do need to start getting people outside of the sector in to really bring some new ideas. And I'm also feeling so much more positive about next year than I have for the last 12 months. So thank you for joining.
Amanda Steele
Thank you, Kathryn
Kathryn House
And Mike, thank you for joining as well. Great to have you on the program. I know you're already planning next year's Congress in Perth and we've included a link to some information on that in our show notes.
Mike Zorbas
Thanks for having us, Kathryn.
Kathryn House
And to our listeners, thanks for tuning in. Make sure to follow Talking Property wherever you get your podcasts. We'll be kicking into gear in 2025 with a property prediction series featuring some key industry leaders, so keep an eye out for that. Until next time.
