Property Strategies 2015 and Beyond; Distilling New Opportunities

Adrian Harrington4 August 2015

Brian Haratsis, Executive Chairman of MacroPlan presented at the Folkestone Real Estate Outlook Seminar in Melbourne on 29 July 2015 (and the week before at our Sydney seminar).  Brian is at the forefront of strategic thinking when it comes to property and the big picture trends impacting our sector (he is also very good at the micro level – spatial analysis and navigating rezoning and development applications throughout the approval process).

His presentation gave those in attendance a new found optimism about the opportunities that lay ahead if Australia can harness them.

Brian’s main thesis is that Australia is on the eve of what promises to be one of the most radical periods of structural change in its history and the property sector is ground zero. Despite the looming shadows of an ageing population, falling productivity, slow growth and the end of the resources super cycle,, relatively few people are discussing solutions and gearing up to ride the waves of innovation beginning to swell offshore. The traditional property cycle drivers will be supplemented by major structural change (economic and social).  This means that betting on timing of the cycle is only one way to secure relatively high returns.  Understanding new geographies and new property products (e.g. new retirement living products) will provide lower risk and potentially improved returns.

Australia is being transformed by four primary AIGE factors:

  1. Ageing and Health
  2. Information Technology
  3. Globalisation
  4. Exports

Structural changes will generate business sector demand for new property products, new locations and highly mobile labour forces.

Unlike the suburbanisation ‘long wave’ (1950–2000) which had previously driven property development and planning, from 2015 the AIGE era will not rely solely on fringe urban expansion as a primary growth driver. The result of AIGE is a paradigm shift of intergenerational significance away from planning and development focused on urban fringe expansion and the move from ‘suburbanisation’ to ‘functionalism’.  Functionalism focuses on access, freight, competitive (productive) economic outcomes, employment (e.g. participation and labour mobility), and the identification and delivery of major projects.  As a result, new city shapes and property development opportunities will emerge.

So what are Brian’s key predictions:

  1. By 2060 Melbourne and Sydney will be the same size that Chicago is today, Brisbane will grow and there will be intensification of the eastern seaboard ;
  2. Australia’s global opportunity will be driven by Asian population and economic growth. Brian stressed that globalisation encompasses the flow of technology, knowledge, people, values, ideas, capital goods and services across national borders and that Australia has a wonderful opportunity to move beyond just the export of goods and resources to technology, knowledge and services. Tourism, off the back of the wave of Chinese wanting to holiday in Australia, and the export of education and business services to Asia are the big winners here;
  3. an ageing population will drive the health sector as Australia’s number one employment and number one public expenditure sector and the types of location and funding of both medical and health facilities, will change while the accommodation for the over 65’s, from retirement villages to aged care facilities will need to change to cater for an ageing population that will have different needs, expectations and mobility;
  4. information and communication technology is changing economic and spatial relationships in overt and covert ways which is the beginning of major changes in supply chains and consumer behaviour.  The big real estate winners will be groups that can provide appropriate located accommodation for freight and logistics providers (just look at the growth of large distribution sheds around major transport interchanges) and those who can embrace technology for the delivery of services. Brian highlighted the success of Silver Chain’s home  hospital service in Perth, which is designed to enable you to receive hospital-level care, normally provided in a hospital or emergency department, in the comfort of your own home with the medical equipment monitored from a suburban office and highly trained clinical staff who can be dispatched from a central location to your home; and
  5. new infrastructure along the eastern seaboard will be property game changers - Sydney’s second airport, upgrades to Melbourne and Brisbane airports, a high speed rail line connecting Sydney, Canberra and Melbourne and an inland freight rail line between Brisbane and Melbourne will create new opportunities around this infrastructure.

Brian’s final message was “the challenge and opportunity is to apply similar thinking across every sector and to different regions of Australia.” Hear, hear!! As one person leaving the Melbourne seminar said to me “if only our politicians had the foresight to embrace what Brian said, Australia would be the lucky country for another 100 years”.

For those who want to explore more of Brian’s stimulating and thought provoking insights, you can buy a copy of his book “Beyond the Fringe: Understanding Planning and Profiting from Australia’s Property Markets in 2020”.