According to people who keep a close eye on this sector the way we see public housing is about to radically change. That’s thanks to the massive $4 billion Waterloo redevelopment in Sydney that will change perceptions, the enormous funds already allocated by state and federal government around the nation, and the savvy private developers and financiers such as Capella Capital and Plenary who have jumped in to reap the opportunities.
The breakfast event we attended on Wednesday hosted by CIBSE in Sydney could not have been better timed – nor more optimistic.
Keynote speaker was Richard Smith director of quantity surveyors MBM and he’d been invited by hosts the Chartered Institution of Building Services Engineers to paint a picture of what to expect in the property market over the near term.
He said the “boom” word. It echoed what another speaker at the event told us the day before, recruiter Steve Slater from Slater.
We confess it was news to us. Like everyone else, we’d been hearing about how hard-to-impossible resi development had become. Post COVID cost pressures are legitimately blamed but not so planning or zoning, given that we already had a big resi boom before the pandemic and that nothing in the planning regime had changed since.
We know we need more housing but it’s what kind of housing that’s critical. Certainly not more luxury housing.
At the CIBSE event Smith zeroed in on the social housing sector that his QS firm specialises in. The company has got a big workbook in place, with more on the way.
And he urged his peers in the room to pay attention to the emerging opportunities.He pointed to the $10 billion allocated by the federal government, $5.5 billion from the New South Wales government, Victoria with another swag of around $5 billion, and more around the country.
The company is gearing up to participate. In a conversation on Thursday, Smith said there were about 120 staff in Sydney, a total of 200 nationally and plans to get to 220 by the end of the year and around 300 within three or so years.
“That’s a lot of nerds in the office,” he laughed. But there were also people working on advisory and strategic work, he added.
He told the audience at the breakfast that there’d not been an opportunity like this in the 26 years he’d been in the business. “There’s a been a market shift, and where there’s a shift, there’s an opportunity.”
The most interesting thing was that most of the “business as usual builders, the tier two builders don’t want to build resi any more”. They were more interested in building train stations, hospitals, and prisons, which had allowed a big gap in the market to open up.
“There’s not enough builders to do all the work that’s coming.”
New look social housing will boom
Key was the new look social housing that was not at all like the social housing that the audience might know from the past – low priced; low quality work. It aimed for better more sustainable qualities that would stand the test of time, along with the extreme weather that we might expect to be on the way.
“The money’s actually being secured. You’ve seen all the deadlines in the papers,” Smith said. “So it’s all going to happen in some shape or form. How it plays out is partly up to us, really, because I think it needs some good help in here.”
The pinnacle of this shift in perceptions will come in part from the massive new $4 billion Waterloo project, a redevelopment of the old public housing towers in Sydney’s inner city, with their “beautiful looking towers” and “well thought out communities”.
What’s even more interesting, Smith said, was that now the private sector was involved.
Stockland was one such company. The resi developer had been recently named to lead the Waterloo project, enticed back to the apartment market after a long hiatus – and strongly enough to beat off rival Lendlease.
It will work in a consortium with Link Wentworth, City West Housing, Birribee Housing and Homes NSW.
Another indicator was the involvement of financiers such as Capella Capital and Plenary jumping into partnerships with community housing providers.
These were companies that want to “make a buck, they can see the opportunities”, Smith said.
Sustainability pays and is proxy for quality
Smith said the projects on the way would all need good consultants to do the work – and the new breed of clients would be happy to pay for quality.
He urged the industry professionals to aim higher in their ambitions; with sustainability central to their goals. His office currently had 300 cases of water ingress defects it was dealing with. Keeping the weather out should not be so difficult.
And sustainability pays, he added.
It was now commercialised and proxy for quality. “I’ve seen a lot of a lot of the smart guys in the city commercialise sustainability, and what it looks like in the back end of the feasibility, rather than the front end of the feasibility, because it sometimes costs a little bit more to adopt sustainable solutions. But you look at the asset class, you look at the defect reductions, all that stuff, it’s real, right? The data is only just coming to the market now.”
Not so long ago, sustainable features were the first thing to be taken out of the development brief when the purse strings tightened.
With more sophisticated analysis tools now available, you could prove that 5 and 6 star Green Star buildings had made good returns.
“When you adopt these things you’ve got a better quality asset.”
It might cost 3 per cent more upfront but “who cares? You’re talking a 30 or 50 year lifespan.”
This was especially important in apartments that can cost an average of $20,000 a year to maintain, he said.
He told The Fifth Estate that tracking embodied carbon was a big part of his company’s work. It’s “big time,” Smith says.
All up Smith’s company has nearly 40,000 social housing dwellings it’s involved in, in places such as Waterloo, North Parramatta and Telopea, along with “a bunch of subdivisions in places such as Bonnyrigg and Airds.
It’s been hard to get excited about this sector in the past, he said. It’s been the least attractive of all sectors, but Waterloo will change that.
It will be the “new face of social housing”.