"You can’t create land, and Australia remains a desirable place to live" - the bull case for residential property

It has been a big year for private markets and real estate, driven by competing headwinds and tailwinds which have provided the push-pull dynamics that continue to create opportunities for investors.

Will those dynamics continue next year, and what are some of the other factors that could have an outsized impact?

To answer those questions, I recently sat down with MA Financial’s Joint Chief Executive Officer and Executive Director, Julian Biggins.

MA Financial is a global alternative asset manager specialising in private credit, real estate and hospitality, lending to property, corporate and specialty finance sectors and providing corporate advice.

The conversation with Biggins, however, focused primarily on residential property.

2024’s headwinds and tailwinds

Biggins highlighted interest rates and consumer resilience as the most significant factors in 2024 – with the latter providing a strong tailwind. Despite interest rates tripling for many borrowers, the Australian economy and consumer spending have remained surprisingly robust.

"The Australian economy has held up pretty well in the light of what we've had to digest”, he noted.

One of the surprising developments of 2024 and a significant headwind for the property market has been escalating construction costs, notes Biggins.

Such costs have risen by 40-50% over the past two to three years, making many projects economically unfeasible, according to Biggins.

He illustrated this with the following example:

“Residential stock six years old might sell at $8,000-$9,000 per square meter today, but constructing that same product now would cost $13,000 per square meter.”

While the pace of increase has slowed, Biggins emphasised that the high costs constrain supply in hard asset-backed sectors, such as residential and infrastructure development.

Best investment and biggest challenge of 2024

Biggins highlighted MA Financial’s decision to invest in Sydney Harbour marinas as the team’s best investment for 2024.

The team acquired the d’Albora marina portfolio for $225 million. d’Albora is Australia’s largest premium marina network consisting of 10 marinas including the iconic Rushcutters Bay and The Spit in Sydney.

At the time of the acquisition, Biggins notes that it was a natural fit for MAF, which already has significant investment and operational capability in retail, hospitality, and other alternative real estate assets. 

For this interview, Biggins added that “Demand for marinas is strong due to limited supply and increasing boat sizes”, with the acquisition leveraging high demand and constrained supply in prime locations.

When it comes to challenges in 2024, Biggins highlighted illiquidity from past investments.

While 2024 was largely positive for investments, Biggins acknowledged challenges arising from decisions made several years ago. These include illiquid funds tied to assets that became harder to sell amid market adjustments.

“These aren’t decisions we made today, but they are consequences of a cycle that’s moved through readjustment”, said Biggins.

Outlook for 2025: real estate opportunities amid constraints

Despite constrained supply, Biggins is optimistic about opportunities in real estate, particularly in residential properties.

He sees value in acquiring existing properties below current construction costs, especially in high-demand markets like Sydney and Melbourne.

“You can’t create land, and Australia remains a desirable place to live,” he remarked.

However, he remains cautious about investing in office space due to uncertain demand and policy implications stemming from domestic elections and global uncertainties.

Addressing recent softness in residential property prices, Biggins described it as a minor readjustment in a long-term growth trajectory.

He highlighted ongoing affordability issues in major cities and emphasised the necessity of housing:

“Residential property isn’t just an investment; it’s a necessity—a roof, security, safety.”

He also noted migration trends driving growth in regional markets like the Gold Coast due to lifestyle benefits and relative affordability.

Election uncertainty and market impacts

Biggins underscored the significance of Australia’s upcoming federal election, suggesting it could lead to polarised policies affecting specific industries—something that wouldn’t have been considered not so long ago.

“I think there'll be some polarised policy around certain industries that will shape outcomes.

Six months to nine months ago, you might've said that's unlikely. At the moment, you can't take it off the table”.

This uncertainty may slow decision-making in some sectors but presents opportunities in areas like private credit, where non-bank lending is gaining traction.

Personal goals for 2025

On a lighter note, Biggins – who turns 50 next year – spoke about ageing gracefully and balancing fun with fitness.

Taking some inspo from his Instagram feed, where he is peppered with advertisements about good gut health and callisthenics, he shared a tongue-in-cheek idea to combine the two -whatever that might look like.

In any event, he promised to report back next year as to how it went.