Market Insights – by Trilogy Funds Management
The past year has seen major shifts in Australia's property markets, but not in our attitudes to property. Buyers may favour different areas or property types over time, and price growth may occasionally stall or even reverse, but surveys show that our faith in bricks and mortar as an investment option remains just as solid as the long-term upward trend in property values. Here are 10 reasons why Australian investors' devotion to property is so unwavering.
1. It's the main game
Property is by far the largest asset class in Australia, often making it a key component of any balanced investment portfolio. The nation's combined residential and commercial property market is worth more than $8 trillion, compared to the $2.7 trillion we have saved in superannuation and the $2 trillion invested in the ASX.
2. A real asset
Unlike so many of today's intangible investments, property is something we can see, touch and easily understand. No special skills or knowledge are required to appreciate the intrinsic value of property. That's why financial institutions will lend more readily against it than most other investments.
3. Prices are on the rise again after the COVID-19 recession
Ahead of definitive data from Australian Bureau of Statistics, the Reserve Bank of Australia (RBA) has predicted that Australian is out of recession after two quarters of negative growth, and probably resumed economic expansion in the September quarter. And property prices are on the rise again for the first time since the start of COVID-19, says CoreLogic, with national home values posting a 0.4% increase in October. Melbourne was the only city where values fell over the month, but it too is expected to rebound strongly in November after coming out of lockdown.
CoreLogic Hedonic Home Value Index October | Trilogy Funds Australia
Source: CoreLogic Hedonic Home Value Index
4. Government support
Federal and state governments keenly appreciate the key role property plays in the Australian economy, so they provide solid support for the market. The $680 million HomeBuilder scheme is the latest example of this, but pro-property policies ranging from high immigration quotas to negative gearing and other tax benefits, first-home buyers grants and the First Home Loan Deposit scheme show governments will always do what is required to ensure a strong property market.
5. The RBA is helping too
Interest rates were already at historic lows before COVID-19 hit, and now central banks worldwide will have no choice but to keep interest rates even lower for even longer thanks to the pandemic. By reducing its cash rate to a historic low of 0.1% p.a. in November, the RBA intends to help get people into jobs and reduce the level of problem loans, but this policy will also provide further strong support for property prices.
6. Australians are property-obsessed
Australians are the seventh most property-obsessed nation in the world, a global survey by HSBC Bank last year found. This national fixation has historical roots: even as early as 1881, Aussies were world leaders in property investment. HSBC found that we spend an average of 2.5 hours a week focused on property, more than twice the time we spend at the gym (1.08 hours) or speaking to our parents (0.88 hours).
7. Keeping the faith
Even in the depths of the pandemic, a survey published by ING Bank in October found one in four Australians believed that now was the right time to make a property investment, and almost half saw property as their strongest investment option. Melbourne was the region that most >
The CNSC will continue with its engagement of Indigenous groups and the public regarding its approach to assessing and regulating SMRs, including the reinforcement of its role in the licensing of the design, construction, operation and decommissioning of SMRs. The CNSC will host a webinar-based public consultation on the CNSC's regulatory approach to SMRs in the spring of 2021.
The Action Plan reiterates the following expected results originally identified in the 2018 SMR Roadmap:
- Promoting disclosure to the public and Indigenous communities in relation to the regulation of SMRs, including licensing and waste; and
- Continued engagement of Indigenous groups and the public, wherever possible.
D. International collaboration
Internationally, the CNSC is engaged in collaborative efforts to ensure readiness for the regulation of innovative nuclear technologies such as SMRs. These collaborative efforts seek to find efficiencies in regulatory reviews and information sharing, and to avoid duplication by leveraging other regulators' technical assessments.
The ultimate goal is to develop harmonized approaches for the licensing of advanced reactor technologies, including SMRs. In 2019, the CNSC signed a memorandum of cooperation with the United States Nuclear Regulatory Commission that could support more efficient reviews of SMRs. The CNSC also signed a similar memorandum of cooperation with the Office for Nuclear Regulation in the United Kingdom, enhancing existing collaboration through technical exchanges and sharing of training programs and development activities.
The CNSC is also working closely with the International Atomic Energy Agency (IAEA) and the Nuclear Energy Agency (NEA). This includes chairing the IAEA's Commission on Safety Standards, which is a standing body of senior government officials holding national responsibilities for establishing standards and other regulatory documents relevant to nuclear, radiation, transport and waste safety, as well as emergency preparedness and response. The CNSC is also actively participating in several working groups under the NEA's leadership.
Finally, the CNSC is providing regulatory insight to countries embarking on the use of nuclear technologies and that are planning to develop regulatory frameworks. The CNSC has provided guidance and delivered training to countries on SMR-related safety and licensing issues.
The Action Plan reiterates the following expected results originally identified in the 2018 SMR Roadmap:
- Canada is well-positioned to influence and lead in the development of international enabling frameworks for global deployment of SMRs; and
- Memoranda of cooperation with other nuclear regulators are developed to support more efficient reviews and the harmonization of approaches for the licensing of SMRs, including regulatory requirements.
Conclusions
The Action Plan states the CNSC's position that its work is "in progress".
While no deadlines are specified in the Action Plan, the CNSC has published a more detailed Regulatory Framework Plan (2017-2022) which outlines a comprehensive workplan identifying the regulations and regulatory documents the CNSC plans to develop or amend – with specific targets for decisions identified for each element of the workplan.
The themes included in the CNSC's response to SMRs will not be surprizing to other energy regulatory professionals. Most energy regulators, including the Canada Energy Regulator and the Ontario Energy Board, are working to modernize their regulatory framework to:
- Adopt a less prescriptive performance-based approach to regulation;
- Adapt the regulatory process to better engage with the public and key stakeholders;
- Adapt the regulatory framework to increase regulatory efficiencies; and
- Adapt the regulatory framework to better respond to innovative new technologies while remaining technology neutral (and avoid picking winners).
While electricity regulators are engaging with their community to adapt to Distributed Energy Resources (DERs) more broadly, the CSNC is tasked with responding to SMRs more specifically.
Lessons can be learned, not just from examining what other nuclear safety regulators are doing internationally, but also from looking at what other innovative regulators are doing domestically and borrowing from best practices.
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