Do investors have the energy to deal with navigating the compliance landscape?

2023 presents a compelling property landscape. With escalating interest rates, inflationary pressures, rents on a continued upward trajectory and banks tightening lending criteria, it is a stormy scene out there.

Yet despite prices coming off the boil in most Australian capitals, buying property remains out of reach for many and now the government is proposing further regulations to restrict early access to superannuation funds, effectively cutting off a potential lifeline that could help many gain a foothold in property.

Ask almost anyone in the real estate or building industries and they will tell you how difficult it is to get brand-new investment stock built. Construction starts are down and according to The Australian, the number of detached houses commencing construction is set to decline this year to be on par with 2012 levels.

Thanks to ongoing supply chain issues and inflationary pressures, building materials and labour costs continue to skyrocket. Last year CoreLogic’s Cordell Construction Cost Index (CCCI) for Q3 revealed an 11 per cent hike in residential construction costs in the 12 months to September 2022.

Enter the Australian Building Codes Board’s New Liveable Housing Design Guidelines, which come into play in most states later this year and are set to create even more red tape for investors keen to snap up newly constructed properties and leverage depreciation benefits.

Compliance with these new guidelines will mean significant changes to housing designs to ensure they meet strict standards around access, entrances, hallways and internal doors, bathrooms and toilets. And we all know this means even more time, potential delays and increased costs to build.

As usual, it is a minefield to navigate these new guidelines and there is no blanket rule across the nation. While the start date varies from state to state, these new standards will come into play in October 2023 in Victoria, Queensland, the ACT and the Northern Territory. Interestingly, NSW and Western Australia are not implementing the new standards as of yet and South Australia is undecided.

But wait, there’s more coming on the compliance front.

Energy efficiency requirements are also on the move with the benchmark for the building fabric to become seven stars in almost every state, up from the existing six-star energy efficiency requirements. Compliance with the new rules requires a “whole of house” energy budget assessment.

These new higher standards don’t only apply to new houses in states and territories adopting them they are mandatory in all new homes, apartments, renovations and multiple dwellings.

Let’s just say a storm is brewing out there. Rising interest rates and inflation are the dark clouds on the horizon, while the distant thunder is the threat of approaching changes to design and build regulations and potentially how you can tap into your superannuation.

Property is a long game; it is a marathon rather than a sprint. If investing is your goal, don’t get sucked into the vortex and allow the news of the day to delay your plans. Just a glimpse into the future regulations coming our way is a sure sign that there will soon be a lot more for investors in new property to deal with than another 0.25 per cent interest rate increase.

James Nihill is the managing director of Patrick Leo