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29 August 2023
Qualitas, a renowned non-bank lender in the construction arena, forecasts the commencement of Australia’s upcoming housing cycle. A striking 90% of their recent $1.4 billion investments, designated within just the first seven weeks of the ongoing fiscal, is steered towards residential projects.
Shedding light on this bullish trend, Andrew Schwartz, Managing Director of the ASX-listed Qualitas, mentions that the lion’s share of their $1.4 billion investment portfolio this year predominantly supports the residential sector. This marks a significant upswing from last year’s numbers.
Spotlighting the tight housing scene, Schwartz commented, “With a mere 1% vacancy rate, it’s imperative that new houses enter the market to bridge the demand-supply gap.”
Driving revenues through funds management and direct commercial real estate lending, Qualitas has successfully doubled its revenue, registering a figure of $73.4 million for the year ending June. This lucrative growth, attributed to heightened interest and fee management income, has uplifted their after-tax profit to an impressive $22.5 million, a leap from the preceding year’s $12.1 million.
Schwartz points to the under-supplied Australian housing market magnetising global investors. Within the past week, Qualitas clinched fresh mandates, securing a promising $750 million for residential construction and an additional $700 million for broader residential ventures.
With the recent stabilisation in the previously escalating construction costs, developers exude renewed confidence in finalising contracts. Schwartz notes a substantial 20% surge in off-the-plan apartment prices in Melbourne over the past year, propelling apartment presales. “Presales momentum is revitalising,” he added.
Developers are now re-strategising. The era of traditional processes, where acquisition of site and permit was followed by presales, a construction contract, and finally finance sourcing, is undergoing a transformation. The present uncertainties surrounding construction pricing have developers prioritising cost estimation. Following this, they lean on alternative lenders like Qualitas to finance their ventures.
Highlighting the shifting dynamics, Schwartz mentioned, “Developers now tend to secure finance post estimating construction costs, even before initiating presales. Traditional banking systems demand extensive presales.”
Schwartz also emphasised the current gradient in residential projects. While owner-occupier apartments are witnessing feasible selling prices, investor-owned private rentals haven’t regained momentum equivalently. This scenario renders build-to-rent (BTR) projects more enticing, prompting a noticeable tilt towards BTR.
However, this BTR trend might not be set in stone, with Schwartz referencing data from the 2016 and 2021 censuses. This indicates a potential swing from investor-centric apartment purchases to owner-occupier acquisitions, with the BTR model gaining traction.
Conversely, while residential realms flourish, the office sector displays waning strength. Schwartz acknowledged a surge in requests to Qualitas for office asset refurbishment and refinancing. He opined, “Office assets have lost their sheen, making them less preferred in the current market.”
Despite securing an impressive capital commitment, including a notable one from the Abu Dhabi Investment Authority, Schwartz remains tight-lipped about the exact figures Qualitas aims to deploy this fiscal.
With an already impressive commitment of $1.4 billion, the construction industry should keenly watch Qualitas’s moves in the coming months.