Trend #1: The reputation of the builder and developer is increasingly important to property buyers

David Milton, Managing Director of CBRE Residential Projects, notes a clear shift in buyer focus. "Who’s delivering it?” is now a critical question. “It’s not just finishes and design”. He explains that this interest is manifesting in sales presentations, where a third of sessions are full of these enquiries, compared to around 5% a decade ago.  

“Reputation now is more important than ever in this market", Milton states. He cites a recent Rouse Hill project where developer brochures were in more demand than project brochures. He explains that buyers are more informed, leveraging online resources and seeking assurance in the trustworthy credentials of those behind the project. 

Milton also reports improved engagement. A recent North West project saw 13 out of 15 appointments from prospects who had enquired the previous year, indicating strong renewed interest. In addition, he explains weekend appointment attendance is up from 60% to 75-77%, signaling increased purchase intent. 

These observations align with independent YouGov research, which found that iCIRT ratings are contributing to improved consumer confidence, with 69% of iCIRT-aware respondents reporting improved industry perception in the last 12 months, compared to just 7% of those unaware of iCIRT.

“My experience is that you’ll get higher prices or higher returns out of being more credible”, Milton asserts; and supported by YouGov data indicating 3 in 4 buyers are willing to pay a premium upward of 3% for projects with independent due diligence and ratings.

Key takeaways:

  • Buyers are demanding transparency regarding builder and developer credentials.
  • iCIRT ratings serve as a key trust signal for potential buyers.
  • Independent ratings can help provide assurance in a credibility-driven market.

 

Trend #2: Funders are placing more emphasis on credibility amid evolving contractual risks

Domenic Lo Surdo, President of the Commercial & Asset Finance Brokers Association of Australia (CAFBA) and Group Executive Chairman of Stamford Capital, notes a heightened emphasis on builder/developer credentials by funders. "It’s always been important, but I guess it’s been an increased area of focus over the last 2-3 years following some of the work done by the Building Commission and the heightened risk around insolvency." 

This increased scrutiny is directly tied to the shift from fixed-price contracts to those with “rise and fall provisions”, which now places greater risk on developers. "As a consequence, financiers are having to take that into consideration when they're underwriting deals", performing more thorough due diligence, examining financial stability and delivery capabilities. "They want to understand who the people are behind the business, what experience they have and what projects they’ve delivered”, says Lo Surdo. 

Lo Surdo adds that iCIRT ratings are a valuable tool for funders, providing independent data to assess risk. “Every bit of additional data helps, particularly if it’s independent. Where a developer and/or a contract builder has an iCIRT rating, the willingness of the market to look at that deal has improved, lifting the availability of capital, and invariably driving the price down.”

This aligns with the Stamford Capital 2024 Real Estate Debt Capital Markets Survey which showed that more than half of funders in NSW actively use or were integrating iCIRT ratings into their decision-making.

Key takeaways:

  • Contractual shifts increase developer risk.
  • Funders rigorously assess financial and delivery capabilities, personnel, experience, and project history.
  • iCIRT ratings are increasingly integrated into funder decision-making, providing crucial independent risk assessment data.

 

Trend #3: iCIRT ratings provide assurance in a more liquid but higher risk market

Despite substantial market liquidity, with both banking and non-banking sectors actively funding viable projects, funders are more discerning than ever, affirms Lo Surdo. This heightened caution stems from evolving contractual risks and increased insolvency awareness. 

iCIRT ratings have become a critical tool, providing funders with an independent layer of assurance. "Funders are certainly taking iCIRT into account when assessing this capability in terms of underwriting. iCIRT has provided another layer of assurance", he explains. 

He emphasises that "once financiers get used to a certain way of underwriting risk, it very rarely goes the other way; it very rarely softens." This suggests that rigorous assessment of builder and developer credentials, supported by iCIRT ratings, is likely to persist, ensuring long-term stability and credibility within the industry.

Key takeaways:

  • Ample funding is available, but funders are more discerning.
  • The rigorous assessment of builder and developer credentials, supported by iCIRT, is likely to persist.
  • iCIRT ratings can help increase funder interest, creating more competitive rates and favourable terms for rated firms.

 

Trend #4: The industry is moving towards the best version of itself

Matt Press, Assistant NSW Building Commissioner, notes the positive impact of iCIRT ratings. "What I have noticed most strongly is that iCIRT rated businesses have got the fire back in their belly. Even if they missed the mark the first time, the assessment process has given them a desire to improve and try to make their business the best version of itself.”

Press observes that the industry is shifting towards long-term sustainable, credible practices, driven by regulatory changes and a renewed focus on quality. “I think construction is well known as a place where in a supply chain the top of the tree is looking to shed risk and push it as far down as possible. And I think one of the things that we've really noticed is that risk coming back up to the head parties - the developer and builder, and them appreciating that they actually have a lot to do with controlling and mitigating risk.” 

He adds that more industry players are recognising the long-term value of managing risk, brand and financial exposure. Governance, compliance, and sustainable growth, all elements that iCIRT assesses, are now priorities. “We’re seeing a close alignment between what iCIRT is looking for and what we’re trying to encourage businesses to do from a regulatory perspective," Press states. 


Key takeaways:

  • iCIRT ratings foster continuous improvement and drive better practice.
  • iCIRT supports regulatory outcomes by lifting capability and standards.
  • iCIRT provides a path for businesses to demonstrate best practices.

 

iCIRT adoption is accelerating across the industry. Over 1 in 3 medium and large residential builders and developers in NSW have been using iCIRT, collectively representing more than 2/3 of the state's residential building market by value. Over 80% of rated entities are renewing their iCIRT ratings, demonstrating ongoing commitment and value. 

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