Property Strategies 2015 and Beyond

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Property Strategies 2015 and Beyond

Distilling New Opportunities

Presented by Brian Haratsis

July 2015

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40 Years Ago…. 40 Years Ago….

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40 Years Ago….

40 Years Ago….

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40 Years Ago

40 Years Ago….

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40 Years Ago….

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40 Years Hence By 2060 Melbourne and Sydney will be the same size that Chicago is today

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Cyclicality Cyclical Drivers: Annual Growth Rate in Number of Owner-Occupier Housing Loans, 1980–2012

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

1980 1984 1988 1992 1996 2000 2004 2008 2012

Annual growth rate in number of owner-occupier housing loans

Source: ABS, MacroPlan Dimasi

-2%

0%

2%

4%

6%

8%

-40%-30%-20%-10%

0%10%20%30%40%50%

Dwellings Investment (LHS) Household Consumption Expenditure (RHS)

An

nu

al G

row

th R

ate

An

nu

al G

row

th R

ate

(Rea

l GD

P)

Cyclical Drivers: Annual GDP Growth Rate, 1960-2012

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Globalisation

Driving a New Property Map

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Globalisation

The flow of technology, knowledge, people, values, ideas, capital goods and services across national borders affects each region in a different way due to the region’s geography, physical attributes, resources, individual history, traditions, culture and priorities.

(Based on Knight, J. Internationalisation Remodelled, 2004)

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Globalisation

Australia’s global opportunity will be driven by Asian population and economic growth.

By 2031, South East Asia will accommodate a 1.7 billion person middle class, an increase of 1.2 billion persons.

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Globalisation Asian Ports Dominate the Global Shipping Industry

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Globalisation: Aviation

As of November 2012, China had 182

commercial airports.

Under the 2011-2015 national plan,

82 new commercial airports and 55

new civil airports are to be

constructed bringing China’s total

number of civil airports to 230.

Additionally 101 airports will be

renovated or expanded.

The whole airport industry

infrastructure investment scale will

reach 425 billion RMB.

0

100

200

300

400

500

600

700

800

900

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Air China QANTAS Airways China Eastern Airlines China Southern Airlines

Sea

ts (

00

0's

)

Growth in Airline Seats from China to Australia – 2000 to 2011

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The Global Servicisation Wedge

Value and Volume of Service Exports, Australia

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Technology

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Information & Communication Technology Changing Space Hierarchy: Not as Expected

New Opportunities E.G. National Economic clusters

Central Place Theory Network Cities Theory Spatial Risk Theory

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Digital Trade

Digital trade i.e. domestic commerce and international trade conducted on the internet has already had far reaching effects on global economies and city shapes in Australia. It has fundamentally transformed many aspects of the way businesses operate and interact with each other. This includes:

Lowering barriers to market entry for small and medium size enterprises (SME’s)

Increasing production efficiency. For example in the services sector the way ideas are recorded, developed and replicated

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Digital Trade Impacts on Retail Floorspace & Distribution

Freight and Logistics

Distribution of services and Online technologies. This includes services such as ‘home hospital’

Distribution of services via ‘on demand’ technologies (e.g. movies via NetFlix or Hulu)

Access to business inputs such as finance, accounting and legal services all of which can be accessed on line

Access to global markets via Online share and bond trading

Creation of new markets e.g. sophisticated finance products which can be traded Online

Creation of major new services e.g. Online gaming, which is now a bigger industry than the film industry

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Structural Change

Mining Capital Expenditure Services Capital Expenditure

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Population: Fast Growth Australian Population forecasts –up to 2061

Source: ABS Cat 3222.0 (2013)

2011-12 2021-22 2031-32 2041-42 2051-52 2061-62

Population as at June 30 (millions)

0 - 14 4,299,878 5,093,268 5,576,695 5,979,853 6,562,393 7,048,986

15 - 64 15,204,062 17,318,254 19,494,945 21,726,174 23,633,140 25,374,891

65 - 84 2,797,747 3,896,092 4,956,198 5,688,891 6,514,459 7,541,706

85+ 420,308 558,595 864,154 1,269,477 1,607,110 1,894,639

Total 22,721,995 26,866,209 30,891,992 34,664,395 38,317,102 41,860,222

% of Population

0 - 14 18.9% 19.0% 18.1% 17.3% 17.1% 16.8%

15 - 64 66.9% 64.5% 63.1% 62.7% 61.7% 60.6%

65 - 84 12.3% 14.5% 16.0% 16.4% 17.0% 18.0%

85+ 1.8% 2.1% 2.8% 3.7% 4.2% 4.5%

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Key Emerging Service Sectors

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Future Demand for retirement living dwellings

0% 5% 10% 15% 20% 25%

5-9 years

15-19 years

25-29 years

35-39 years

45-49 years

55-59 years

65-69 years

75-79 years

85-89 years

95-99 years

Increase in Residential mobility 2006-2011

?

Medical Improvements

1 2 3

4

New Pre-Retirement Market

Major increase in house purchase (underway) but underestimated

Future Pre-retirement

Traditional Pre-retirement

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Freight and Logistics - Growth

From 2012-2017, the freight and logistics industry is expected to grow by 73,000 jobs to 870,000

The sector will also produce 151,000 job openings for new employees due to an aging workforce

The gross value added hourly rate for freight and logistics is $69; 6.1% more productive than the average hourly rate of the Australian economy at $65

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Education

Australia’s international educational industry contributed $15.6 billion to our economy in 2013, making it one of the world’s largest

Students from China and India comprised one third of total enrolments

In 2013, educational services made up 57% of $6.9 billion in services exported to China and 53% of $1.9 billion worth of services exported to India

Australia’s fourth-largest export behind Natural gas, coal and iron ore

•Tourism is fifth

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Tourism

Tourism is a key economic driver generating more than 900,000 jobs and injecting over $100 billion into the Australian economy.

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Chinese Visitors

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Growth Hotspots

Sydney, Melbourne & Brisbane

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Sydney & Melbourne | 40% of Australia’s Population

Queensland, New South Wales & Victoria | 65% of Australia’s Population

Capital Cities

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Population & Employment Growth

By Greater Metropolitan Region (2001-2011)

City Population Population Growth (%) Jobs Jobs Growth (%)

Melbourne 601,512 17.6% 173,081 20.3%

Sydney 431,713 10.8% 106,209 10.7%

Brisbane 391,911 23.2% 116,747 22.1%

Perth 329,161 24.0% 112,445 33.2%

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Sydney 2060

In 2060, Sydney will accommodate at least 8.5m permanent residents and 2m non-permanent residents, or… growth will be diverted

This is approx. double the population in 2014

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Melbourne’s Metropolitan Planning Strategy

Key facts and figures

Melbourne’s population is expected to be between 7.6 and 8.5 million people by 2050. At this point it will be more populous than Sydney.

Recent bureau figures imply that Melbourne today is home to 4.35 million people, and 27% bigger than the city it was at the start of 2000.

Melbourne is forecast to grow by 90,000 persons and 27,800 dwellings per annum to 2030.

The proportion of people aged 65+ is expected to increase from 14% to 22% by 2050.

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Housing Demand

According to the latest VIF forecasts (2014) Melbourne requires approximately 40,000 new dwellings per year to 2051. this is substantially higher than construction rates seen in the past of approximately 28,000 dwellings per year.

High and medium density dwellings are expected to make up about 60% of future dwelling demand to 2031 (approx. 24,000 dwellings p.a.).

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Housing Demand - Summary

Greenfield

Growth Areas

Established

Areas Total

Historical Growth (2004-11) 12,000 15,600 27,600

Projected Demand p.a. (2011-31) 16,100 22,900 39,000

Total Demand (2011-2031) 322,000 458,000 780,000

Houses 230,000 40,000 270,000

Townhouses, units and

apartments 92,000 418,000 510,000

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Infrastructure: Property ‘Game Changers’

Intensification of the Eastern seaboard

Sydney’s 2nd airport

High Speed Rail

Inland Rail

Don’t forget…

Brisbane Airport second runway

Melbourne Airport third runway

Major freight and logistics projects in Melbourne, Sydney & Brisbane

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Conclusion: Eastern Seaboard Megalopolis

New Global Regions ( Pilbara/ Kimberley/ Gascoyne/ N.T. Surat and Bowen Basins)

Job Mobility

Contractors

Density of Opportunity

Capital Risk Minimisation

Importance of the 1.5 hours regional Community Shadow

Low and Negative Growth in some regions 2015-2021

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Thank you.