PEET’s Michael Stone on developing during COVID
Our CEO Kirsty Chessher-Brown interviewed Michael about development during the pandemic and what 2021 might hold for the industry.
Tell us about your COVID experience
If I start back towards the beginning of the year there was good activity in January and February but by March that had completely changed and what we saw from our customers, was uncertainty that took all of the momentum out of our market for the best part of four or five weeks. It was driven by the fear of COVID 19 and the unknown, however that was probably the worst of it. So, once people got their minds around the extent of the health crisis, that fear abated quickly. Customers realised that we had to deal with the health crisis but that was not going to change their long term requirements for a house.
You’ve got to give both levels of government a lot of credit for the way they managed the early part of the crisis and whilst the border closure was a little bit draconian, it proved to be the correct decision particularly over the last few weeks with further community outbreaks in Victoria. The community probably took a lot of comfort in the way government has reacted and responded well to these measures.
The communication of information from both the State and Federal Governments has been done well and is very responsive. Its certainly assists us running the business, when the information is accurate and timely. I think that had a huge positive impact, which gave our customers and community in south east Queensland a lot of comfort. So, by April and May we were on our way back to experiencing pre-COVID levels of demand. We then saw the HomeBuilder grant introduced in early June and demand has obviously picked up from there.
Given the closure of international borders and at times our State border, are you confident that there is still strong underlying domestic demand?
Demand is current strong, however what eventuates over the next 12 months is the unanswered question. There is a lot of stimulus in the market, whether it’s JobKeeper, JobSeeker or HomeBuilder. So, the question for our industry is really how deep is the current level of demand and how long this will continue. We have taken a reasonably balanced position, where we want to take advantage of the stimulus, but are very focused on what happens post-Christmas and into calendar year 2021. We are not being over-exuberant right now and developing too much stock.
Personally, if you look at south east Queensland there are some really strong fundamentals that should remain post stimulus and into 2021. There are two unique characteristics that differentiate us from Melbourne and Sydney. One is lifestyle., we still provide great lifestyle benefits…. and secondly we remain very affordable relative to those two markets. So, if I fast forward nine months, it’s inevitable the market will slow down post stimulus, but hopefully this will be offset somewhat by strong affordability, historically low interest rates, and the SEQ lifestyle factor.
We also need to keep in mind, that we are a supply-constrained market. There is a lot of green and red tape that does slow down the amount of stock we can bring to the market at any one time so I don’t see south east Queensland will have the ability to absorb all of the demand.
Whilst demand will decrease post stimulus, I don’t see any major increase or decrease of property values into 2021. We’ve been at CPI growth for the best part of 10 years, and I’d probably expect zero to CPI growth throughout 2021.
What are your thoughts on how we support and stimulate the market into 2021?
With the Queensland and national debt levels at very high levels, we are not relying on stimulus to continue post-Christmas. However, investing in infrastructure – particularly transport infrastructure and re-investing money from asset sales into infrastructure, whether it’s roads or rail – would play a role in supporting the commercial and residential markets moving forward.
Whilst we see records levels of infrastructure expenditure now….that’s just catch up for SEQ. To ensure market fundamentals and lifestyle factors remain relevant to SEQ housing markets, we need a well-communicated plan for the next five to 10 years around investment in transport infrastructure.
If you had a magic wand and could remove one piece of red or green tape overnight, what would it be?
There’s three levels of government that provide that green and red tape. So, if I was to wave a magic wand, it would be consistency across the three levels. At times, policies can contradict each other. We’ve invested in projects where timelines from acquisition to settling on our first house block was 18 months. Now that is as good as you’ll experience in SEQ and a fantastic result. But other projects and communities take the best part of 4-5 years for achieve the same result, for zoned / serviced land. It’s very challenging to make an informed decision whether you invest money and where, particularly with 2 examples that are so vastly different. The issues around the local community’s attitude to development, infrastructure connections, water authorities, vegetation management are all the same, it is just managed differently between municipalities, the State and Federal authorities.
Consistency and uniformity between three levels of government is critical for our industry.
Have you seen any changes in customer preferences since the start of the pandemic?
In terms of non-residential land or commercial / retail within our town centres, our expectation was that things would be fairly subdued throughout the COVID period, but we are still seeing quite a good level of demand for retail in centres attached to greenfield communities. In fact the take up of retail development sites has exceeded our expectations.
Residential customers are no doubt looking for traditional homes with a backyard and well executed parks and amenity which sits well within our greenfield model. We also develop rural residential land as well and have seen that demand increase over the last six months. It’s not as tangible as people wanting to socially distance in traditional forms of housing, but people are certainly seeking lifestyle aspects, the room and privacy that comes with these offerings.