Property Investors Can Now Apply More Scrutiny on Investment Decisions

Executive summary: 

• Commercial and residential properties in Australia, valued at approximately $370 billion, have faced significant challenges due to remote work and a decrease in the workforce and emigration.  
• As a result, Property Investors are actively seeking alternative prospects within the Property sector, particularly in residential property.
• Access to comprehensive and accurate information about specific assets is crucial for successful investment in emerging sectors and can enhance trust and transparency in investment decisions. 
• The introduction of the Building Trustworthy Indicator (BTI) by KPMG Origins was a response to multiple incidents with built projects around NSW, aiming to restore transparency and trust in the construction industry.
• The BTI collects data to calculate a reliable indicator, instilling trust in the quality and integrity of assets.
• Initiatives like the BTI are essential for providing transparency and confidence to the investment sector, empowering investors to make well-informed decisions when considering an individual asset or an entire portfolio view. 

Commercial and residential properties play a pivotal role in Australia's economy, representing a substantial asset class with a combined value of approximately $370 billion in listed and unlisted properties.¹

In light of the shift towards remote work and the decrease in the Australian workforce due to the impacts of Covid and emigration, commercial assets have faced significant challenges. This was clearly demonstrated by an analysis conducted in late 2022, which revealed a staggering decline of over 55% in the value of income and capital returns for direct property investments.²

As a result of this trend and the prediction of challenging times ahead, Property Investors, including Superannuation funds and Real Estate Investment Trusts (REIT’s), are actively seeking alternative prospects within the Property sector. Given the challenges posed by inflation, increasing interest rates, evolving working conditions, and a growing emphasis on ESG factors, it is only natural that these investors are closely examining residential property as they shape their investment decisions. 

Historically, investing in commercial property has always been considered a secure and reliable investment choice, backed by strong foundational elements and easily accessible information about specific assets. Ultimately, investors are in search of high-quality assets, and this quality is primarily determined by the overall building quality, such as minimal remediation and defects, as well as the location, rental yield, and the growth potential of the property. 

To successfully invest in emerging sectors on a large scale, it has become imperative to have access to comprehensive and accurate information and data about specific assets. This will not only enhance the level of trust and transparency in investment decisions but also pave the way for greater success and profitability. 

The introduction of the Building Trustworthy Indicator (BTI) by KPMG Origins was a direct response to multiple incidents involving building projects in New South Wales. These recurring incidents highlighted the urgent need for reform in the construction industry. In light of this, the NSW Government appointed David Chandler as the Building Commissioner and he unveiled a comprehensive 6-point reform plan for the sector. The BTI was released as a response to this agenda, aiming to restore transparency and trust in the construction industry, particularly for consumers.
 
The BTI gathers comprehensive data on the builder, contractors, materials used, and certifications issued, aligning with the guidelines set forth in the Design and Building Practitioners Act 2020 (DBPA). This valuable information is then used to calculate a reliable indicator, which is assigned to the specific asset, instilling a sense of trust and confidence in its quality and integrity. 

Initiatives like the BTI are essential for providing the necessary level of transparency and confidence to the investment sector when considering an individual asset or an entire portfolio view. KPMG Origins can help investors to address this need by offering assurance, empowering them to make well-informed decisions. By increasing transparency, these initiatives uphold integrity, promote fair practices, and foster trust within the investment community, ultimately benefiting the entire sector. 

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¹ Commercial real estate: Property funds vulnerable to big falls as investors exit, analysts warn (afr.com) 
² Property Council of Australia 2023