THE future of property industry is shifting due to changes in the population, technology and the emergence of new investors. Whilst this poses new challenges, it also presents unique opportunities for property professionals.
The Australian Property Institute (API) inaugural National Property Conference on the Gold Coast heard from a panel of industry leaders including API CEO Mike Zissler, Opteon Property Group CEO Chris Knight, Emerge Capital partner Nathan Parris, Arena REIT head of property Robert de Vos and CoreLogic RP Data executive general manager Greg Dickson.
Zissler said the future is changing and it is not unique to the property sector, it is also affecting the law, education, healthcare professions, just to name a few.
“It is just part of that changing world we live in,” he said.
“The world we have been living in, professionals have been working in, is the normal world. We crave and we rely upon things to be simple, we want it orderly, we want it consistent, we want certainty.
“The reality is we are living in a post-normal world… This all sounds like terrible news.
“But the reality is, it is about opportunity,” he continued.
Zissler observed that one of the biggest changes is industry consolidation.
“We have rapid industry consolidation, today we have about 70% certified practising valuers working for 20 companies, I think I have understated that, it is probably 10 companies.
“The nature of the go big is here,” he said.
Zissler said the increasing use of technology and the digital evolution is also another factor.
“We used to say it is about more for less, but it’s not just about how we want to make you more efficient with technology, it’s actually we want more out of you, more information, more usage,”
“Hands up, how many people have heard of Blockchain?” Zissler polled approximately 900 delegates.
“Blockchain is going to have a significant impact on the property industry. Back in 1993, when we talk about the internet, most of us said “oh the internet won’t change our world”… Blockchain is bigger than the internet.
“Yet we have had only 20 or 30 hands up in this room.
“You need to understand Blockchain because that is an opportunity for the property industry,” he added.
Opteon’s Chris Knight said the property industry needs to remain innovative.
“Property companies need to get big. Today’s increasingly challenging business environment means that it’s going to the norm for companies to undertake mergers, acquisitions and generally expand.
“This has already been landscape that we’re familiar with, particularly in valuation and other allied property services sectors.
“If disruption is the new norm, what or who is going to disrupt you and how can you counteract that,” Knight said.
Zissler said the most important matter for the property industry is intellectual property data, which is the most challenging space.
“Who does own your intellectual property? Most of you are giving your data away unknowingly. I need us to get into the position where if you are giving away your data, you are getting some compensation for that.
“Fees have been about the same for the last 30 years and you are getting squeezed and squeezed. You need to understand what is your IP, what is your data and I think at the moment, we have got to stop giving it away,”
Zissler said the API also has to think big and the institute is talking to potential international partners.
“More than 50% of property transactions in Australia have some form of international influence. For us to continue living in our isolated spot, it is not going to work,” Zissler said.
Emerge Capital partner Nathan Parris said Australia is one of the most attractive markets in the world for Asian money.
“Australia has achieved 100 consecutive quarters of economic growth,”
And there is a new player Parris said is heading to Australia.
“Some of the recent deals that my firm has done, has actually been with Japanese, Singaporean and American investors, so it is not all Chinese.
“To be frank, we actually find the Japanese to be some of the most attractive and interesting investors because they’ve got very limited growth in their home market, they’ve also got negative interest rates – so what that means is that they’ve got very cheap equity, cheap debt and therefore cheap cost of capital.
“Don’t be surprised to see the Japanese coming in a much larger way. Me, personally I’m spending a week in every quarter in Japan at the moment,”
Parris said his firm is currently meeting around 500 discreet global investors a year looking to get a foothold into Australia.
He added that there are bright prospects for foreign investment in Australia, not just in the traditional property markets but also in alternative assets, such as student accommodation and healthcare.
Arena REIT’s Robert de Vos said alternative assets or as he refers to it, the social infrastructure asset class, offer tremendous opportunities in the coming decades.
Currently there are 940,000 childcare places, 58,000 student beds, 48,000 beds across 197 prisons, 90,000 hospital beds, 184,000 retirement homes and 163,000 aged cared facilities.
“On the whole we are currently in a good shape. Unfortunately things are about to change, the future of social infrastructure is about to depart from the current trajectory for the last few decades for two simple reasons – firstly a rapidly changing population and secondly as community needs are also changing.
“We are not dying quick enough, over 30% of the population are over 70 years old and that is putting unprecedented stress on social infrastructure,”
At the same time, de Vos said there are proportionately fewer taxpayers.
Considering this lower tax base, de Vos said Australia needs to invest a further $225 billion in social infrastructure in the next 20 years including $2.4 billion on childcare, $81 billion on hospitals and healthcare, $71 billion for aged care, just to a few.
Read and watch more special coverage of the Australian Property Institute’s 2016 National Conference:
- Focus on fundamentals not financial wizardry
- Future of real estate offers challenges and opportunities
- Residential oversupplied but no property bubble
- Recent changes to API a positive move
- Valuation industry encouraged to cap downside risk
- Disruption in property industry here to stay
- DoD land contamination to test property prices
- Value uplift drives repurposing of industrial land
Australian Property Journal
