Property Update - Speedbump or Hitting the Brakes?

Julie Maxfield

PrincipalAitken PartnersView Profile

The conversation around Australia's property market has changed remarkably quickly. One moment it's all about rising prices and fierce competition, the next it's talk of a major slowdown.

Recent stats have confirmed that home values have fallen year-on-year and the number of properties on the market has dropped, indicating many buyers and sellers are continuing to weigh-up their options before making a move, but it doesn’t mean that all activity in the property market has ground to a halt.

A cluster of different factors, including new requirements for sellers, increased interest and land tax rates coupled with sagging consumer sentiment, will all take some time to play out. Residential property values regularly make front page news, but in the background commercial property is also experiencing headwinds (although some sectors are proving to be resilient, including data centres, aged care and retirement living).

The bigger question for property owners, developers, investors, landlords and businesses, is not simply where the bottom of the cycle is, but what happens next when good looking deals take longer, projects become more challenging, and well-documented property arrangements come under pressure?

While transaction volumes may have slowed, there are plenty of ongoing legal and commercial issues that our clients are facing. We continue to see matters crossing our desk for projects that are well underway. Rising construction costs, tighter financing conditions, and market sentiment have caused some developments to be delayed or restructured, often giving rise to a range of legal and operational issues that require careful management.

Projects that may have appeared commercially viable two or three years ago can look very different now. Developers and landowners may find themselves in disputes, revisiting contracts or renegotiating commercial arrangements.

Leasing is another area where economic conditions are having an impact. Both landlords and tenants are reviewing positions as their operating costs rise and market conditions keep changing. Many landlords and tenants are less concerned with securing new space and more focused on ensuring their existing arrangements remain practical and fit for purpose considering the headwinds.

Property disputes are also more prominent when market conditions tighten. Disputes over boundary issues, private loans and securities, encumbrances, leasing arrangements and contractual disagreements may have been dormant or parked during more active periods . When fewer transactional opportunities are available, parties are often more inclined to pursue resolution of long-standing disputes and remove obstacles that have been lingering in the background to create certainty for future transactions.

Regulatory and compliance obligations continue to add pressure and complexity in various industries. Property owners and operators are navigating an array of challenges including evolving land tax settings, building compliance and rectification requirements, stricter financing and lender compliance requirements and planning constraints. For many businesses, the management of these issues is taking priority over chasing new opportunities.

Against this backdrop there are still sectors which are showing consistent activity. Our ageing population is continuing to drive demand for aged care, retirement living and related property developments. As an increasing number of people transition their living arrangements each year, the ability to age in place remains an important consideration for many Australians. Our team works extensively in this sector, and understands the careful planning, regulatory compliance and operational considerations required to successfully navigate these considerations.

There is no shortage of speculation about where the market goes from here. But for most property owners, investors and businesses, the more pressing question is how to deal with the opportunities and challenges already on the table. Protecting assets, managing risk, resolving disputes and ensuring that projects are still commercially viable continue to be critical priorities.

If you're navigating a property issue, seeking the right advice at the right time can make all the difference. We would be pleased to discuss how we can help.

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