COMMERCIAL SECTOR FLAT UNTIL CHRISTMAS
Written on the 8 April 2010
CHRISTMAS can’t come soon enough for commercial property developers on the Gold Coast.
A Reed Construction Data report obtained by Gold Coast Business News shows that 119 commercial projects were mothballed across the city in 2009 until Feb 2010 – representing 13 per cent of the 887 projects afoot.
There is currently just over $5 billion worth of commercial projects underway in Queensland, with the figure expected to double by 2017. The residential sector has $20 billion currently underway.
The dormant commercial space is not expected to pick up momentum until the end of the calendar year, with a two-speed recovery, routed by publicly-funded construction activity, which includes Rapid Transit, Gold Coast Hospital and Carrarra Stadium. However private sector investment is likely to remain fragile over the short- term.
Director of Housing at Master Builders Queensland Paul Bidwell, says while there were positive signs ahead, talk of a rebound in the June quarter is premature as private sector construction activity remains weak and investor confidence low.
“It will take longer than expected and although the publicly funded stuff is really holding up, investors need to come back into the market,” says Bidwell.
“Reducing PIP charges and speeding up approvals are two steps toward trying to improve the situation, but the emphasis is on the banks to start lending again. The banks are full to their gills with property, they want to get it off their books.”
Senior economist at National Australian Bank Spiros Papadopoulos, forecasts a tectonic bounce in 2011. He says confidence among nab customers had improved in the March quarter, but would not be drawn into a discussion over the credit freeze or when financial institutions would start bankrolling new projects.
“Business credit growth has turned and companies are telling us that they’re more confident,” he says.
“Queensland is lagging and there’s a lack of investment there as investors continue to tread carefully. One positive sign is that the investor confidence declines of 2009 have stopped.”
A deal between Gold Coast City Council and commercial developers to reduce PIP charges is long over due, although some progress was made yesterday for smaller residential projects.
A meeting with Council’s sustainable futures committee chaired by Cr Peter Young and attended by UDIA vice president Steve Harrison and Property Council of Australia Gold Coast president Peter Trathen, resulted in a $4 million rescue package.
It was agreed to double the available discount to residential projects, with $200,000 in cuts available for up to 20 new dwellings. Commercial developers would receive cuts of up to $200,000.
“The focus of this stimulus is at the grass roots level, not the big end of town. Our focus was to get a stimulus that was meaningful and one that would stimulate jobs and Council has supported that. It supports the carpenter and his mate and the guy who delivers the concrete,” says Trathen.
Council last week agreed to a 100 per cent offset of the transport charges for residential projects, but refused to budge on its offer of a $4 million funding pool, despite industry calls for $20 million in cuts.
Cr Young says Council is not in a position to throw in $20 million on a largely unproven agenda and that the process would be monitored over the next 12 months. He is confident that the committee recommendations will be voted in favour by Council on Monday.
“I think they (industry committee) understand that we have budget challenges just like everybody else,” he says.
“The main issue is that we don’t know if it’s going to have an effect, but that’s the commitment we have made so far.”
The scheme will be effective as of April 29. $1.5 billion was committed by Council’s budget excess funds from 2009, while the remainder will be borrowed. Rate payers will pick up the tab.
Young says it’s still too early to determine which projects will benefit from the package, but admitted he was ‘aware of a couple highly likely to jump out’. If successful, Council will make a recommendation to State Government for further funding.
The construction sector directly employs 13 per cent of the city’s workforce - or 49,000 workers.
“One in seven workers on the Gold Coast are directly employed by construction and development, but tens of thousands more rely on this industry for their livelihoods,” says the UDIA’s Steve Harrison.