AVID Property Group’s Bruce Harper on developing during COVID
Our CEO Kirsty Chessher-Brown interviewed Bruce about development in South East Queensland during the pandemic.
Tell us about your COVID experience
It’s been quite interesting in the sense that we’ve been able to adapt quite quickly. We probably wouldn’t have thought about work from home many months ago, how we deal with practices in the organisation, and how we adapt the best setups. I think COVID has shown us that a lot of things we’ve thought about doing in the past but may have taken months to study, were able to be resolved almost overnight. We had to adapt quickly and be able to continue to run a business.
There’s been speculation in the media about house prices, with various commentators predicting significant declines. What is your view on how SEQ house prices will fare through 2020?
I am more of an optimist and I tend to think that we’re not going to see a significant or even any fall in house prices, in fact, we may actually see rising house prices. We may however see a different result for apartments. But I think house prices, will continue to rise given that there is still quite a bit of pent up demand out there in the marketplace.
AVID is active across a number of corridors. Do you see any particular South East Queensland corridors faring better than others?
It’s interesting that the Coast markets seem to move quickly first. On both the Gold Coast and Sunshine Coast, there was very strong and immediate response to the HomeBuilder stimulus. People were lining up to buy blocks of land in both those areas. The areas in northern and southern Brisbane, including the Logan corridor things were a bit slower. It took a week or two to get a response in those sub-markets. But now both markets are quite strong.
What’s your view on the current level of stimulus that’s been made available from various levels of government and whether they’re being effective in the marketplace?
Well, HomeBuilder has had an instantaneous and dramatic effect on sales. I think, like a lot of greenfield developers, we seem to have had a common experience with a significant downturn in demand when the COVID pandemic hit during the March/April/May period. However, people that had unconditional contracts tended to proceed. There was a significant decline in sales though, with many who were not unconditional electing to cancel the contract and access their refundable deposit. When HomeBuilder was announced in June, those buyers who had cancelled their contract came back in. So we’ve effectively had a bring forward of demand for future buyers and we’ve brought back those buyers who had left the market a couple of months earlier.
So HomeBuilder has created a surge in demand for land and I think there’s now a looming shortage of registered stock and ability to actually produce more stock by the December/January period when we’d have to have a new titled property on the market. So for us as developers, it’s been tremendous and we’ve had large numbers of people lining up outside our sales offices to buy land and it seems to be that a lot of developers are in the same position. We’re all now scrambling to get DAs in and civil contracts in place to see if we can actually produce more things, within the next six months.
While it’s certainly been good for the greenfield market, the scheme still has some anomalies for some product like spec builds, which are not covered in the eligibility criteria. Those products are sitting there as unsold stock, and it’s obviously going to be important to be able to move those homes to be able to redeploy that capital into new houses. So one of the impacts of the HomeBuilder grant, as it’s currently drafted, is to actually disadvantage those builder developers who have taken that speculative risk of building stock and putting the capital in there prior to the pandemic.
HomeBuilder works in some sub-markets, for example townhouse projects to capture off the plan sales, assuming they are able to start construction within the time window. However, apartments are likely to run into some difficulty I think in terms of HomeBuilder and maybe there needs to be some finessing of the eligibility criteria to be able to accommodate that product type because the objective is to stimulate all of the trades and not just the detached home sector of it.
Do I think that we need to add any more stimulus to the market? Probably not. You know, if you’d asked me probably two or three months ago, I would have said yes we should have looked at other forms of government stimulus, but I think we should keep our powder dry on additional stimulus at the moment, and see how the market reacts once JobKeeper ends and when the economy starts to recover. We’ll start to be in a better position to be able to advocate for targeted stimulus, should that be required.
Do you think given the success of the lifestyle markets means that people’s propensity to travel a little further to work has increased?
I think there is probably an element of that. There’s certainly been people who have said that while they probably had never considered living on a lifestyle block of land in the past, because of a need for close proximity to work, they are now actively investigating those sorts of options. I know a few developers who deliver that type of product on the fringes of our city have said they’ve been overwhelmed by demand.
So, it clearly is a factor. During COVID, people have learned that they potentially don’t need to be sitting in the office or work all the time. However, there are still some tasks that will have to continue to be performed in an office environment, including those tasks that require a lot of coordination. It’s simply quicker and more effective to do it that way, rather than via technology.
As someone who stayed in the office with a skeleton staff for the entire period, I found that the level of virtual engagement involved with communicating with staff worked well, but probably added an hour or two hours a day to my work. That seems to be the consistent experience across other managers in the property industry.
Have you seen any change in buyers’ preferences post COVID?
I think our product still meets the market but I don’t think it is actually as good as it could be. I think we’ve learned from this exercise that new houses generally provide inadequate space to work from home as most new homes just have a small study nook. I think we are now going to have to design our houses with more formal study areas that people will be able to utilise and block off from the rest of their houses, so we’re not all sitting at the kitchen table, and video conferencing looking at someone’s bookshelves behind them.
We’re probably going to have to have more recreation rooms built into their houses as well. It doesn’t just mean a media room but may be a gym or other form of recreation. And, interestingly enough there is some really quite nifty products coming on the market at the moment. At our new Harmony display world, one of the builders has converted the roof of the house into an outdoor patio and garden space. So they’ve delivered a rooftop garden with barbecue which is great because as blocks get smaller, we need to explore more ways to deliver private open space.
What’s your view on the outlook for 2021?
We’re probably going to get a continuing surge in the building and development market for the next six months. My view is that the second half of next financial year will probably be slow because we’ll have drawn forward a lot of that demand. And there is obviously so much more uncertainty there. So, if we’re looking at the property industry the residential developers and builders are looking pretty good. However, I do think that the retail and commercial space of the industry has a difficult 12 months ahead.