Highlights from the Property Council of Australia’s Property Congress 2024

The Property Council of Australia‘s Property Congress 2024 in Townsville brought together industry leaders and policymakers to address the pressing issues facing Australia’s property sector – from demographic shifts and housing affordability to economic forecasts and future policy proposals.

Here, delegates from MRI Software share their top takeaways from two days of informative presentations, panels and networking sessions.

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Simon Kuestenmacher: Property industry faces multiple challenges of retiring workers and future skill shortages

Opening on an optimistic note, leading demographer Simon Kuestenmacher said that Australia’s position as a prime destination for international capital remains strong and emphasised the country’s resilience in global rankings.

“It’s brutally hard to kick Australia out of the Top 10. It’s a very attractive destination in comparison to what is happening across the world. And this is why global capital still want to come to us.” He believes this comes down to our stable economy, democratic system of government and expected demographic growth.

Kuestenmacher said, however, that migration-driven growth remains crucial, as birth rates in Australia have reached historic lows. He pointed out that maintaining a steady influx of skilled migrants will play a crucial role.

If you want population growth, you need to import people. You want to remember as a rule of thumb in Australia, that two-thirds of our population growth comes from overseas. Only one-third is homegrown. The way that birth rates keep falling, it will soon be even more in favour of migration.

“The skills shortage will be the single biggest issue. And we need to revamp the migration system to (provide) more employer-sponsored visas so that we have better control over what industries and what kind of jobs we let into the country,” he noted.

A particularly pressing concern for the property industry is the looming retirement of key workers. Kuestenmacher explained, “The retirement cliff measures what share of the workforce is already of retirement age or nearing retirement. (It’s) fifteen per cent of the national average.” He drew attention to several occupations crucial to the property industry that face critical shortages, such as welders, bricklayers, crane operators, truck drivers and commercial cleaners.

While the perception of technological replacement deters young people from some of these careers, Kuestenmacher believes the fear is premature. “There will not be a single self-driving truck in Australia outside of a mining site in the next decade,” he claimed, emphasising the continued need for human workers.

Politics is shifting too. “Increasingly housing policy will be dictated by the parties that create the balance of power in government. That means policy – housing policy in particular – will increasingly be geared towards whatever the Greens or the Teals think is useful,” Kuestenmacher said. This change could lead to more renter-friendly policies and reshape the housing market.

He believes in the need for innovation in construction and automation to address labour shortages and boost housing supply. However, the significant capital needed for structural changes remains a hurdle.

Dr Nicola Powell: Price growth is cooling but demand for limited housing is driving the market forward

Dr Nicola Powell, Chief of Research and Economics at Domain, offered a comprehensive analysis of Australia’s current housing market, with the tension between supply constraints and affordability issues as a central theme. She suggested that while the pace of price growth may moderate, the fundamental demand for housing will continue to shape market dynamics in the coming years.

How does our current housing market look? You see extreme housing shortages and high interest rates. And that undersupply is really dominating. We’ve seen that come out in price growth. Unit prices have seen six consecutive quarters of growth. But (now) we’re seeing a slowdown in momentum. And that is because we’ve got this widening gap between home prices and the capacity to pay.

Despite this, Dr Powell stressed just how central property is to Australian life saying, “Our property market is the heart of our economy. Homeownership is embedded in our culture. It is not only a way to build wealth, it is a sign of success (and) a way to build security for yourself and your family.” She emphasised this point with a striking statistic: “(In fact) 70 per cent of Australia’s household wealth is tied to the value of our homes.”

Looking ahead, Dr Powell anticipated ongoing challenges in matching housing supply with evolving demographic needs. With more people living alone and shifts in population age groups, our current housing mix might not be what we need. This mismatch between available properties and consumer preferences suggests a need for strategic planning in future development.

Despite these challenges, the Australian property market stays strong. Domain’s research shows plenty of activity ahead – its nationwide study found 77 per cent of the 8,000 people surveyed plan to engage with property somehow in the next year.

The Hon Peter Costello AC: Productivity improvement is critical for Australia’s future prosperity

Former Federal Treasurer The Hon Peter Costello offered an assessment of Australia’s economic position and prospects, drawing from years of experience steering the nation’s finances.

He began by highlighting Australia’s enviable global position. Despite a relatively small population, Australia boasts the world’s 13th-largest economy, supported by rich natural resources, a strong agricultural sector and sophisticated financial markets. However, he warned that this position is not guaranteed.

“Even though we have one of the highest standards of living and one of the highest per capita GDPs in the world, we’re slipping. In the last six quarters, we went backwards,” Mr Costello cautioned. This set the tone for his discussion on how to address Australia’s economic challenges.

Mr Costello referred to the key drivers of economic growth. “GDP is influenced by the 3 Ps, namely, population, participation (the percentage of the population that’s in the labour force) and productivity,” he explained.

On the population front, Mr Costello noted Australia’s heavy reliance on immigration for growth, given the aging population and low birth rates. He said that while this influx supports economic expansion, it also puts pressure on housing and services.

Turning to workforce participation, Mr Costello offered a more positive outlook. “Participation in Australia is very good. We have done exceptionally well on this. Female participation is now at the highest level in Australian history, at 63.2%. It’s never been higher. And we’re doing better at keeping older workers in the workforce, which we’ve got to do if our population is aging,” he said.

Mr Costello identified productivity as the critical area needing improvement. Despite technological advancements, productivity rates have stagnated, a trend he sees as a major concern for future prosperity. He specifically called out the property industry.

(The property) industry is one of the industries where we should be doing much better with productivity. Commercial construction in Australia is more expensive and less productive than it should be.

Addressing tax reform, Mr Costello advocated for simplification and reduction of the tax burden to stimulate economic activity. “We need a lot of reform in this country. We need reform to our tax system, but it’s not to make taxes higher. Reform, in my view, is to make them simpler, and to relieve the tax burden, and to give the economy the opportunity to take off,” he asserted.

Looking to the future, Mr Costello suggested that political approaches might need to shift to accommodate necessary economic reforms. He talked about the need for bipartisan cooperation to bring about these changes, saying that current strategies for addressing economic challenges may need to be reconsidered.

The Hon Peter Dutton MP: Far-reaching reforms are needed to tackle Australia’s housing crisis

Australia’s Opposition Leader, The Hon Peter Dutton, MP, painted a sobering picture of the housing challenges facing young Australians, highlighting the growing gap between homeownership rates of current and past generations.

“In the 1980s and 1990s, the median house price was between three and five times the median household income. Today the median house price is eight times the median household income nationally, and the ratio is almost 10 times for Sydney,” he explained. This escalation in prices has created significant barriers for potential homeowners.

The Opposition Leader further emphasised the financial hurdles facing young Australians. “It now takes a record 10.6 years to save for a 20 per cent deposit, and half a median household income to service a typical new mortgage. So in short, fewer younger Australians own homes,” he stated.

To tackle these challenges, Mr Dutton proposed a $5 billion investment to remove infrastructure roadblocks and bring 500,000 additional homes to market. This initiative would support developers and councils in unlocking land and expanding the housing supply.

Addressing workforce shortages in the construction industry, Mr Dutton suggested prioritising skilled migration.

There are skill shortages in many parts of the country. What we should do is prioritise, on the skills list, the ability to bring more people in with the requisite skills, the trades, which would provide some relief for what we know is a dramatic reduction in that workforce at the moment.

Mr Dutton also criticised what he saw as excessive government intervention and high tax burdens, arguing that these factors hinder housing affordability and economic growth. He advocated for reducing bureaucratic processes and promoting consistency in tax and energy policies to encourage investment and economic stability.

Looking to the future, Mr Dutton emphasised the need to balance economic growth with environmental concerns. He stressed the importance of decarbonising the economy without sacrificing economic stability and highlighted the need for a consistent regulatory environment to attract international investment.

Panel Session: View from the Top

Torie Brown, Executive Director of the PCA’s Student Accommodation Council moderated a panel session that brought together industry leaders to discuss current challenges and future trends in Australia’s property market. The panel, featuring executives from Charter Hall, Mirvac, Scape Australia, and ISPT, balanced cautious optimism with acknowledgement of significant challenges.

Despite concerns over interest rates, the panelists expressed confidence in Australia’s economic future, citing strong population growth, balanced budgets and robust financial systems. However, they unanimously acknowledged a critical housing supply shortage, exacerbated by decades of underinvestment.

I think the big issue is that we need consistency. We need all governments to work together because this is a generational crisis. Everyone in this room wants to see their children be able to buy an apartment. This is critical, so we need to work together.

– Carmel Hourigan, CEO, Charter Hall Office and National President, Property Council of Australia

Campbell Hanan, Group CEO and MD at Mirvac highlighted the complexity of addressing this shortage, noting, “I think the Achilles heel is we’ve got this record infrastructure spend underway in Australia. We’ve got energy transition and we’ve got a record need for data centres and construction and all of that is happening at a time when we need more houses.”

He added, “Most of the construction activity in this country at the moment is focused on anything other than housing. I think simplistically for a builder, you’ll go to the areas where you see the least risk and the more likelihood of being paid, and I think that’s at the government end of the spectrum rather than the private developer end of the spectrum.”

The discussion turned to immigration, viewed as crucial for driving productivity and addressing skill gaps. Amanda Steele, Group Executive Head of Property at ISPT emphasised the need for targeted immigration, stating, “You look at the fact that we have skilled construction workers coming in, but they’re often in suits, not shorts. And so we need those skilled construction workers that will work on-site, not just sit behind a desk.”

While the panel recognised the importance of government policies in unlocking housing supply, Craig Carracher, Executive Chair at Scape Living urged the industry to take initiative regardless of government action. He said, “We’ve got a responsibility to execute here and I think we’ve got an opportunity. I’m not seeing any headwinds that would say you should not be deploying into this market in the living sector.”

Looking to the future, the panellists anticipated increased market activity as interest rates stabilise. They highlighted potential growth in Purpose Built Student Accommodation (PBSA), Build-To-Rent (BTR) and alternative real estate sectors, emphasising the importance of leveraging AI and technology.

Torie Brown offered insight into changing homeownership trends, noting, “I don’t think the dream of owning a home is gone, but I think the nature of what you think you can own is changing. I certainly have a view that Australia is fast becoming more like other major global cities and countries where the style of home ownership is moving away from the concept of a home to more of owning apartments.”

Campbell Hanan concluded on a hopeful note regarding affordability, saying, “I think there’s a huge amount of Australians who’ve been locked out of the market because of interest rates. And that affordability angle will change as the interest rate cycle starts to move.”

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