At Impact Group, we keep our finger on the pulse of sentiment and activity in the construction industry. After a complex couple of years, we are finally seeing more positive attitudes. Take a look at why the stress is lifting and where the green shoots of optimism are showing up.
Age equals opportunity
Impact Group were thrilled to sponsor the DCM Leaders Summit, a two-day event for executives in the Seniors Living Sector on 19th and 20th of March. A full house of 579 people and 40 engaging speakers touched on the major points of opportunity in the aged care and senior living sector.
A key theme to emerge was the ‘Dawn of the Silver Decade’ and how the rise in demand for retirement living, home support and residential care is driving the optimistic view that real, positive margins are in sight.
At the event, DCM Group CEO Chris Baynes explained that two years ago the sector was in dire financial circumstances, but now, the Aged Care Taskforce's Final Report recommendations will, if enacted by the Government, have the potential to add $3.6 billion to the sector and put it "in the black". The mood in the room was very positive as industry executives realised that the combination of demand and funding opens the door to exciting new projects.
Interest rates have peaked (probably)
Never say never, but the general feeling around interest rates is that they have hit their peak and will plateau before dropping once or twice towards the end of the year.
The Reserve Bank’s March interest rates announcement stated that while the outlook remains uncertain, inflation continues to moderate and the monthly CPI indicator was steady at 3.4 per cent over the year to January, with momentum easing over recent months.
The RBA says the central forecasts are for inflation to return to the target range of 2–3 per cent in 2025, and to the midpoint in 2026. This gives the industry confidence that high interest rates will ease and cash will become less costly in the near future.
With the expectation that capital will be easier to access by the end of the year, now is a good time for feasibility studies and planning. This way, projects will be able to hit the ground running when rates drop.
State Environmental Planning Policies are changing
Meanwhile, the demand for housing in NSW is impossible for the Government to ignore. As one report stated, it is estimated Greater Sydney will need more than 1 million additional homes by the year 2041.
As a result, new incentives will encourage developers to include a minimum amount of affordable housing in each new project. Coming into effect in December last year, upgraded SEPP reforms:
- Introduce a new bonus Floor Space Ratio (FSR) of up to 30 per cent and a height bonus of up to 30 per cent where a proposal includes a minimum of 15 per cent of the gross floor area (GFA) as affordable housing.
- Allow state-owned housing agencies to build more affordable housing without needing council approvals.
As Minister for Planning and Public Spaces Paul Scully announced, “Amendments have also been made to ensure the bonuses are available to Build to Rent developments, by allowing them to apply in commercial zones, even if residential accommodation is prohibited under the relevant Local Environmental Plan.”
These changes were only introduced a few months ago but they deliver so much potential for greater project profits. One client that Impact Group recently consulted for was able to add an extra 100 apartments to their development as a result of the SEPP update. This is an immense value-add and if the client hadn’t reached out to us, they would have completely overlooked this opportunity.
Connect with an industry leader
DCM CEO Chris Baynes also mentioned at the Leaders Summit that the aged care industry needs “leadership and responsibility”, and we believe this relates to construction partners as well.
This is why we have invested in obtaining an ICIRT rating, which has assessed six eligibility criteria to formally certify Impact Group for any built environment, including residential development, retirement living, health, education, aged care and hospitality.
You won’t find many other property consulting firms with this certification. It proves our commitment to standing out in terms of:
- Quality service and delivery
- Systems and processes
- Quality assurance
- Expertise
- Compliance and risk analysis
Right now, research and feasibility are key to understanding how changing interest rates and regulations will affect development projects. At Impact Group, we are excited to help clients explore opportunities in residential and senior living projects.
Contact Impact Group to get more value from every project - speak with Alyssa Lanning on 1300 630 063 or email her on alyssal@impactgroup.com.au - we are here to help.