The chief executive of development and construction group John Holland, Joe Barr, says there is a large oversupply of apartments in some areas of Australia but the rollout of billions of dollars of infrastructure will play a key role in managing that supply.
John Holland, acquired by the China Communications Construction Company in 2015, has won more than $8 billion in infrastructure projects in the past six months and has a stated aim to double revenue to $7.5 billion by 2021.
“I think in some areas there is massive oversupply [of apartments] and that is going to be problematic for values,” Mr Barr said. “Most of the economic commentary on that is fairly on the money.”
“You look at the amount and sustainability of the demand-supply equation in some areas and there are so many apartments. How do you differentiate yourself?”
Charter Keck Cramer has predicted there will be 25,500 apartment completions in Sydney this calendar year compared with 17,090 in Melbourne and 10,300 in Brisbane.
“[The market] has got to come off and I think most of the mainstream media have got the commentary going.”
Mr Barr warned that the constant rollout of apartments without proper infrastructure was dangerous.
“Apartments need to be integrated with public transport and a good community – you can’t create a void of just mass residential without the community,” he said.
“There still is a place for a better real estate option in terms of providing not only housing but community.”
Mr Barr, who has overseen the successful bids for Sydney’s Metro system and Melbourne’s Westgate tunnel, said there was plenty of capital around for transport infrastructure projects (especially with his Chinese owner which has a lot of patient capital), and that if done properly, it could enhance a city’s brand and help make the thousands of apartments going up more liveable.
“The Metro [in Sydney] is a game changer. It is a no brainer to take cars off the road and volumes of people into town. We want to make the most of this infrastructure boom – it is a huge opportunity to change the shape of cities.”
He noted that the Chinese parent company’s approach to developing thousands of apartments in China was to ensure there was plenty of infrastructure supporting new development.
“Our owners, who have a development company in China, they say ‘beautiful building wonderful life’. At their developments they put in aged care, healthcare among others.
“And you can’t just have efficient infrastructure – you have to make it a wow!”
Mr Barr said he was complimentary of different governments’ infrastructure rollout but said there needed to be faster procurement and tender processes and more trust between parties.
“The client wants certainty from its contractor and these projects are incredibly complex and there needs to be a level of trust.
“And that trust is borne by having a relationship that assumes the bounds of probity but also gives you confidence in outcomes.”
Mr Barr said the Chinese parent company was looking to make more contacts with governments as it continued to bid for major projects.
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