WAAA – PropertyESP

Build to Rent is one (very viable) option for affordability

Samantha Reece, Director of PropertyESP recently attended the Property Council Build to Rent (BTR) breakfast and found the session so interesting, she thought she would share.

BTR is a new term which has only recently crept into WA’s vocabulary, but in the USA and UK this is a housing model that has begun to gain real traction.

In the USA the BTR sector is the second largest asset class. The listed USA BTR REIT sector alone has a combined market capitalisation of $144 billion, over $50 billion larger than the entire ASX REIT sector.

In the UK, (perhaps the market most similar to Australia in terms of cultural views on renting versus buying) BTR has only existed for about 6 years, however with the support of government investment funds, incentives and concessions, has grown rapidly from a standing start to over 80,000 purpose BTR apartments.

And here is the key – Government investment.

These models have been successful because it is a JV between private and public sector with investment from institutions. In turn tenants can move into these apartments/homes and secure a ten year lease at CPI giving them security of tenure.

What is also interesting to note, is that the BTR model can be applied just as well to greenfields as built form.

With this model holding $2.1 trillion in real estate value world-wide it has become a preferred investment model because of its liquidity, relatively low capital expenditures (each apartment has its own building manager) and the risk adjusted returns.

But in order for this to get off the ground in WA we firstly need a favourable regulatory environment as well as tax ratings with banks and government then contributing 80% of the funds.

Sound impossible? Well obviously it is not because Australians are investing a billion dollars in BTR in the USA and UK as we speak.

For too long we have been talking about affordability and now we are seeing the ramifications for not taking more urgent action.

Housing Choice Australia just recently released results that showed 806,100 households in Australia were seeking reoccurring rent assistance. A further 1.3 million people can’t afford to purchase a property and this is expected to grow to 1.7 million.

In contrast there has been an increase in just 4.5% of social housing stock.

The BTR model defines social housing as in fact economic infrastructure.

You build houses to accommodate people who need to work in these areas such as nurses, police, teachers and the like. The fact that they are housed in close proximity to their workplaces reduces the need for other infrastructure such as public transport and roads.

In this instance social housing is seen as long term investment for the benefit of many generations. And that is essential. Based on current trends it is likely that my own children will struggle to own their own homes in years to come.

National Developer Mirvac to their credit are already trialling this model in the East Coast and it is the bold, that in fact will create a new housing choice in Australia and in return – reap the gains.

There are certainly a number of disruptors currently in the property arena and the next five years are going to be interesting times.

Let’s hope that BTR is in that mix.

Freedom Fit is the new Downsizer

You may have seen PropertyESP’s Director Samantha Reece on Channel 7 News Wednesday evening talking about the concept that she has hatched – known as Freedom Fit – under the WA Apartment Advocacy banner.

After conducting recent focus groups with seniors, Samantha found that when baby boomers moved to an apartment – while they were downsizing the living space they used – they were not downsizing on their mortgage or their lifestyle. Hence the common term downsizer was now somewhat passe.

In fact these baby boomers knew that they would have an abundance of free time once they moved into an apartment and and hence sought locations that offered the corresponding lifestyle that would fill this time.

On that basis they sought locations that offered coffee strips, with natural elements such as the beach or river and also proximity to major hubs such as Perth or Fremantle.

In particular the apartment lifetyle also tended to be a motivating factor to encourage the residents to get out and try new activities and hence provided a new lease on life.

As a result of these findings, Samantha coined a new term – Freedom Fit – to better describe the motivation driving this older demographic.

These retirees were also keen on knowing their neighbours and recommended joint services within districts, such as a concierge service.

It was also evident that the senors in these groups were delighted with the apartment lifestyle and it is these added benefits that apartments offer over traditional retirement villages, which will now be a defining element of Perth’s evolving senior’s housing.

And what is clearly evident though is that this age group will dominate the market for a while yet – and as such we need to be conscious of what they are looking for including more living space, extra bedrooms and storage.

As the market begins to become more sophisticated with its appetite for apartments – so must our choice of designs.

Interesting times ahead!

Coastal living the new black

Despite the resistance by coastal suburbs to welcome apartment living into their community – the research from the WA Apartment Advocacy has clearly shown that this status is going to have to change – and soon.

Of the 155 apartment owner occupiers surveyed, 15% had been living in a coastal location before then moving into their apartment (19% living on the coast). However when asked where they would choose to live next time – 70% stated an apartment and 49% stated a coastal location. 44% also indicated they would choose riverside. This was evenly dispersed across all age groups.

Of the 113 renters interviewed, 11% had been living on the coast and 14% moved into a coastal apartment. But when asked where they would choose to live next 73% stated an apartment and 47% demonstrated a preference to coastal locations.

Of those living in the inner city – the owner occupiers showed a movement away from this address with a drop of 61% to 50% as this being their preferred location.

With Perth’s apartment market still very young, and limited supply in restricted locations, Perth apartment livers have chosen the best from what is on offer.

But ultimately what they want is access to the coast – which up until now has only been available to the privileged.

Councils that have therefore chosen to listen to the 5% of their population who reject apartment living have quite obviously chosen to ignore the majority who want this choice (and rightly so) for their home.

It is a message that Councils and Government will now need to start listening to.

At PropertyESP we are glad for this intelligence which raises the argument for permitting apartment living in key locations such as Trigg, Scarborough, Cottesloe and so forth. Because without it – all we hear are the nay sayers. But now there is a larger voice speaking up – and they are saying yay for choice!

Poll demonstrates support for apartments

The newly formed Western Australian Apartment Advocacy (WAAA) decided to conduct a poll at the Perth Royal Show last week, and the results clearly demonstrated an overwhelming 93% support for apartments.

WAAA Managing Director Samantha Reece randomly surveyed 300 people over the course of the eight day show, and not surprisingly the majority of people recognised that Perth could no longer sprawl further north or south.

It was the first poll of its kind in WA and respondents reflected a cross section of country as well as Perth based residents, all ages and genders. In addition,of the 300 surveyed, only 12% of these were apartment owners.

Regardless of the respondent mix, the poll has however demonstrated that the majority of people believe apartments play a role within Perth and WA.

Of the 7% that did oppose apartments, this tended to be driven by misconceptions that they would end up as slums, reduce neighbouring house values or even erode the community spirit.

In conjunction, some additional verbatim comments also provided an insight into buyers desires.

Young families said that they would purchase an apartment if there was a playground/community garden at the ground level.

While older male respondents also indicated that they would like a Men’s Shed or a place where they could tinker with their tools.

Certainly having apartments near a supermarket and also transport rated highly. But by far the strata fees and prohibitive cost of apartments were a major stumbling block for some potential buyers.

However what this feedback does tend to demonstrate is that apartment designs now need to break the mould of just one and two bedroom configurations.

For some time now, apartments have only meet a small portion of the market (young couples and downsizers) but we are now seeing a growing appetite for apartments being driven by families as well.

From this feedback it is quite clear that the inclusion of gyms, saunas, entertainment rooms etc now needs to be rethought, in order to provide some added variety.

WAAA was commenced by Ms Reece in September, to provide a voice for apartment dwellers as well as those people who support apartments.

Its catalyst was the growing number of small vocal minority groups, who were opposing apartments, regardless of the context.

The WAAA is now seeking to add more balance to the dialogue about housing choice.

If you would like to join the discussion about apartments in WA log onto http://www.waaa.net.au and register.

WA Apartment Advocacy provides balance

Long term property commentator Samantha Reece has launched this week the WA Apartment Advocacy (WAAA) to generate open discussion about the role of apartments within the state.

Motivated by the sway of NIMBYism (Not in my back yard) that tended to dominate Council decisions, Samantha has taken the bold move to enlist the support of apartment livers (people who own and live in apartments) to ensure that there is a more balanced discussion.

“When I witnessed Councils changing Town Planning Schemes and rejecting apartment projects based on what I call, 0.0006% of the population, I decided that something had to change,” Ms Reece said.

“I know for a fact that there are people who love their apartment and would like more choice but they are being hamstrung by people who would prefer to maintain the status quo.

“There have been mandates from State Government for Councils to nominate areas where apartments are a good fit and that is ideally around train stations, retail and on major roads.

“If people speak up about the fact that they want to see more choice then maybe the Councils and Government will have the confidence to make bold decisions, which reflect the needs of their entire community.”

The WAAA is encouraging people to register on their website www.waaa.net.au so that their ideas can be shared with decision makers.

“I have had young people state that they would like to see smaller apartments introduced into Perth, because all they really need is a place to sleep.” Ms Reece said.

“On the other hand I have had families ask why we don’t offer four bedroom and two bathroom apartments like we see in Singapore.

“This is the kind of information that needs to be brought to light so that planning decisions provide real choice.”

Sean Morrison is one of those young people who recently purchased an apartment by NIB Stadium.

“I have exchanged a one hour drive into the City each day for a 20 minute leisurely stroll to work,” Mr Morrison said.

“I literally fill my car just twice a month and that for me is both sustainable and cost effective.

“Because of the reduced travel time I believe I am more productive at work and I also have more free time to enjoy. It is this quality of life that I really appreciate.”