News from the front desk: Issue No 315 – On the power of TV (and Jon Dee); Rosenberg Equities on carbon pricing models; what the HIA said
27 October 2016
Sustainability was in the spotlight this week, TV spotlights that is, thanks to Jon Dee who invited The Fifth Estate and Paolo Bevilacqua of Frasers Property to talk about our patch on his Smart Money show on Sky News.
Dee is well known as founder of Planet Ark, author, speaker and entrepreneur. With his easy communication skills, Jon turns complex ideas into something anyone can understand. He packs his show (at 6.30 pm on Wednesdays) with fabulous stories of clean, green and healthy innovations that make great business ideas.
Paolo spoke about the industrial market, where Frasers is helping tenants see the sense of going green with elements such as energy efficiency and solar power. The winning argument is easy: for every extra dollar of rent to pay for innovations, the tenants get $1.30 back in savings.
He also mentioned the Brickworks retail site in Melbourne. Why hold a competition to make it a Living Building Challenge development?
Again, it makes good business sense, he said. The demographers say that having a point of difference such great biophillic design (including a billabong) will draw more people for longer, and that can translate to more dollars spent on site, which means “you can charge a bit more rent”.
It all makes sense.
We started our segment with an overview. There is so much going on, we said. This industry is starting to look like the crowd outside David Jones at 9 am on Boxing Day. Champing at the bit.
In housing and building there are innovations and new businesses everywhere – from timber and prefabrication to coloured roofs that can slash as much heating as white roofs and new technology that can maximise returns on your solar power to the grid..
Of course we just had to mention the Nightingale project – what business or mum and dad viewer sitting at home isn’t going to get excited about that?
There is so much more to get excited about. The good news comes streaming in on a daily basis
The HIA for instance
On Wednesday morning we popped out to catch up with what the Housing Industry Association was saying at its summit, Housing 2030; Building Better Cities.
Nice surprise. They had some great presenters, among them Dr Peter Newton from Swinburne University of Technology who has featured in these pages for his advocacy of the opportunities for greater density in the so called “greyfields” suburbs; Professor Geoffrey London from University of Western Australia who showed some brilliant examples of the ugly kind of density that makes communities lie down in front of the bulldozers; and UrbanGrowth’s Steve Driscoll, who is always strong on urban planning concepts but couldn’t resist a go at the media for hyperventilating on housing issues and polarising debate.
(Well it doesn’t help when journalist numbers are cut to the bone and most mainstream media folk are never allowed outdoors to actually speak to people.)
Driscoll also said the Feds can’t ignore housing – they’re one of the biggest landowners in the cities, they control capital and they have a role to play.
On his greyfields focus, Newton said planning needed reviews. Most of the higher value sites that could produce the best density yields sit outside of the appropriate zoning and “herein lies the problem”, he said.
What was needed was the transformation of cities from suburban to urban; it was also what was causing disruption.
Getting greater yield could come with more affordable and greater types of housing that were more sustainable – with features such as better walkability, potential for recycling, composting and water capture. Low or zero carbon footprints should also be on the agenda.
But this is no longer exactly radical thinking for the industry, he said, pointing to huge work undertaken by housing research organisation AHURI, which has co-ordinated 70 industry thought leaders to come up with models that identifies barriers and solutions.
London used some excellent visual shock tactics with his slides showing developments in Perth, with massive roofs cheek by jowl with their neighbours, so no usable green space, virtually no trees, loss of birdlife and you need to assume, loss of quality of human life.
The Baugruppen model of community housing in Berlin was a fabulous solution to affordability, London said, but it took off because government provided the land. (Now where is all the Fed land that Driscoll mentioned?)
Another presenter was Ross Greenwood from Channel 9 who provided a hilarious, if not a tad uncomfortable, bird’s eye view of an ageing population, younger folk displaced by wealthy ageing baby boomers and housing a serious and growing problem.
The current housing price boom would inevitably falter, he said. There would be a block of apartments where too many purchasers failed to complete, which would bring the rest of the market down. The fall out would be short lived, he said. The trajectory of housing in Australia was a rising one thanks to population growth and immigration. More skilled migration might be controversial, he said, but it would pretty much solve Australia’s problems, from plugging taxation revenue shortfalls as our existing population aged to bringing in fresh blood driven by clever ideas, and a determination to succeed.
On Monday we also popped along to a briefing held by AXA IM Rosenberg Equities on Level 26 at 1 Bligh Street (where Bloomberg lives) to hear about a new methodology that proves carbon exposure has an impact on share price.
The roundtable of finance and investment journalists opened with some fun references to Isaac Asimov the biochemist, who also dabbled in science fiction writing and his predictions in 1964 for what our 2014 future would look like.
Some were brilliant – cars with “robot brains” for instance, and communications that would include both sight and sound long distance. Others not so accurate.
The point was that it’s sometimes hard to see the big changes under our eyes. When railways first emerged some people didn’t trust them to deliver the milk every day and they continued to keep kept cows in their basements.
Today said the Rosenberg team, “Sustainability” is a reality. “The game of kicking the can down the road on climate change and financial irresponsibility cannot go on for ever.
“We are in a period of massive change in the way we behave, what we buy and how we distribute wealth.”
According to presenter Rosenberg’s Kathryn McDonald, co-author of research she undertook with Nelson Chui, it was now possible to show that a carbon footprint would have a negative impact on share prices.
Coal assets were trading on “incredible discounts” but it looked like they should be priced lower than they are now,” she said.
Global chief executive and chief of Rosenberg Jeremy Baskin said the research was a very exciting approach to learning about stranded assets. It’s a time when we can have “very swift changes in sentiment”, he said
Asked if the carbon pricing likely to get more negative, Baskins said, “Standing here today, given global initiatives, we would not assume it could go the other way.”
Of course in a big market selloff you could assume ESG sentiments go out the window, he added.
The discussion was clearly making the table a tad gloomy. Then someone asked about renewables. Could you assume the opposite impact on prices for renewables?
The whole room suddenly lit up.
Well, the team said, there were obviously a lot of opportunities,
(It felt like we were being advised of the next gold rush; see DJ’s ref above.)
“There is a whole other world to explore with the green economy” McDonald said.
The Property Council open to change
On Wednesday the Property Council also indicated it was open to change. It said in a media statement it would welcome talk about tax on housing, especially if the Baird government would consider abolishing stamp duty “as part of broader reform of the property tax based taxes” in NSW.
The PCA’s NSW executive director Jane Fitzgerald said this was one of the culprits in pushing up house prices and lowering affordability of housing.
She was realistic enough to say a “simple swap to land tax, including on the family home, was unlikely to be politically palatable.”
What would replace the huge taxes paid by the property sector, a tradition that spans millennia and continents, was not specified in Fitzgerald’s statement.
But at least Fitzgerald was way more nuanced than trotting out the old furphy of supply that’s become the constant refrain of some elements of the property development sector, and was this week repeated by federal treasurer Scott Morrison (who used to work at the Property Council and should know better.) You have to wonder, haven’t his advisers let him see that episode of Utopia?