Australia and NZ Property Journal (Propj): Gary can you walk us through what happened in 2023?

Gary Brinkworth (GB): We started the year with a level of conservatism and apprehension and exited it with a lot more optimism and a stronger performance across several dimensions than we thought possible.

The bigger theme was the availability, the sheer level of demand and pressure on housing stocks has obviously underpinned [property] pricing. Our primary objective of the year was to ensure we had reset to what may be a relative norm coming out of the years that were.

That meant starting to work through our long-term cultural and organisational needs, especially given that we’ve been operating largely within a work-from-home context. We also needed to reflect on quality and compliance outcomes in a way that mirrored clients’ desire for faster assessment outcomes.

We were able to adjust our operating model and grow our business [on a relative basis] pretty materially last year. We’ve also looked at where to from here, whether that’s new product innovation, new service lines, and different ways of servicing different markets.

There have been big questions put to our group by clients, and one of the things I’m especially proud of is that our [leadership] team has focused on setting the company up for what the next five years look like.

Propj: What defined 2023 for you?

GB: The most significant issue that emerged was the depth of the [housing] shortage and how pervasive it is across all markets.

The clarity around the level of intervention that’s going to be required on the supply side is the defining element of the year. Everything would suggest to us that the numbers are declining… the issues are that the cost to produce is too prohibitive, and the availability of development options too limited.

Sitting here today, if we continue to do what we’ve done over the last 3 to 5 years, it’s hard to imagine that we are going to get a different outcome.

The trends would indicate that we’re at risk of having fewer new dwellings [rather than more] and this issue goes well beyond the valuation sector.

We shouldn’t think there’s one silver bullet here, there’s a need for a range of different options. Admittedly, supply is important but it needs to be delivered at an affordable price.

Propj: What are the implications for the valuation sector if – in an attempt to build a greater number of homes at a more affordable price – there are significant parcels where the properties have a fairly homogenous look and feel about them?

GB:  For that particular circumstance, we’re going to see a lot more adoption of automatic valuations or other solutions that will satisfy banks’ risk appetite, and that will hopefully make it easier and more streamlined for people to access properties.

I think the scenario you described will undoubtedly be part of a suite of solutions and options. It’s our job to think about how we can best support clients if they’re trying to loan to people wanting to acquire an asset like that.

It might require a physical inspection but it may not and today there’s quite a range of different valuations or assessments that are conducted already as part of a suite of offers.

Propj: Overall, what do you see as key challenges for HTW and the valuation sector?

GB: The banks manage panels through panel providers and while this may have created an arm’s length relationship, I don’t think that’s what the banks want.

What we’ve observed is a [client] willingness and openness to look strategically at how they get an advantage. Adding value to what they’re trying to do has to be evident within the relationship.

Valuation services are a very significant expense within a bank so it’s got to be something they’re getting value on.

One area where I think we’ve challenged ourselves has been around the commercial workflows.

We’ve been investing heavily in technology and have successfully built a resi platform and we’re doing the same for our agribusiness.

This enables us to drive quality, performance and compliance outcomes that elevate the game.

It’s critical that we leverage our expertise within the commercial sector to add value and are now launching the most complete operating platform in Australia we could find.

Propj: Can you expand on the key questions/issues clients raised with you?

GB: Whether an asset is in Perth, Brisbane or Melbourne, large corporate clients want to know that the methodologies, mechanisms and control systems are of equally high standards.

They also want to know that this can be done at scale and with a much-improved set of performance metrics, like turnaround times, and other dynamics.

While this theme has been in the market around resi for some time, a lot of the agri and commercial panels are a lot more fragmented, and managing compliance costs and systems integrations are significant investments that need to be made.

But if you make these changes, you need to A) ensure they align with clients’ expectations, and B) ensure a step-change in performance delivery.

As it relates to those segments, we are progressing well. But there’s a fair bit of work still to be done to get to a level of maturity where those systems investments and process changes provide the full benefits and dividends back to clients.

Propj: Can you put key economic indicators into context as 2024 gets underway?

GB: There’s clearly potential for interest rates to be adjusted downwards.

But what I’m concerned about is a delay in these actions and how they flow through. If the full effects of the interest rate have yet to be felt and if we start softening migration upside – and find ourselves in a recession or in a material downturn – it’s unclear what that really means.

I don’t think we as a collective have a full appreciation of how far that might go or for how long. There may well be some capacity for interest rates to correct – but it will take time to realise that we’re [already] there.

So we might find ourselves in a challenging period before we’re able to adjust the policy setting to come back out again.

Propj: So what do you expect valuation activity to be like this year?

GB: Our view is that we’re settling now into what we expect to be a more normal or stabilised environment, but we expect the ongoing trend of [some] customers wanting to use different products and different types of solutions to continue.

Our mission is to ensure we’re adding value within that process, by developing new products and trying to be relevant.

We manage performance delivery by [individual] valuer pretty tightly and the key performance metrics we look at are those of our clients: Compliance rates, turnaround times, quality of the work – and the ability to add insights.