Papua New Guinea’s major property developers and investors recently banded together to create the PNG Property Developers Association. Deputy Chairman Rupert Bray explains the reasons behind the move to Business Advantage PNG.

Prime Minister James Marape [third from left] attended the ground breaking ceremony for Steamships’ Harbourside South Project on 15 October 2019. Credit: Steamships

Now, they have joined forces to create the PNG Property Developers Association.

‘The association looks to bring together the key developers and investors in large scale property investment,’ explains Rupert Bray, who is also Managing Director of Steamships Trading Company, whose subsidiary Pacific Palms Property is behind the current Harbourside South development in Port Moresby.

Bray estimates the association represents about 80 per cent of the A-grade market.

‘We want to try and establish benchmarks and standards for the industry that give customers confidence’

‘The purpose of the Association is threefold. One is to try and encourage and advocate for regulatory reform and policies that are supportive of a mature property market.

‘The second is to improve liquidity: at the moment, it’s difficult to buy and sell property, and it is hard for corporate investors to get involved in the market.

‘And the last piece is town and urban planning. As big developers, we have a vested interest in ensuring all of the urban centres are properly planned, benefiting not just today’s occupants but future generations.’

Reforms

Steamship’s Rupert Bray.

One reform the industry has championed for years is the introduction of strata title as a concept under PNG law. Strata title laws were finally passed by Parliament last month. Together with amendments to existing related laws, they pave the way for people to buy and sell the units, townhouses and apartments which are part of larger property developments.

In turn, this should encourage both the financing and the construction of such properties.

Another expected reform is the introduction of a capital gains tax in PNG, which looks likely to be levied on property transactions from 2023.

Bray says the association supports the introduction of a capital gains tax.

‘We fully recognise the need for the State to benefit from a capital gains tax, [but] we want to make sure that it gets done properly and there’s no unintended consequences.’

Best practice

Within the industry, Bray tells Business Advantage PNG, there is also scope to improve how property developments themselves are conducted.

‘We want to try and establish benchmarks and standards for the industry that give customers confidence,’ he says.

A ‘collaborative effort’ to achieve best practice in the industry could help prevent poor construction practices that lead to buildings that can’t be occupied once complete.

‘We expect our members to adhere to those standards. If we adhere to those standards ourselves, then we’re going to move the market and we’re going to set the benchmark.’

Buying and selling

The Association would also like to make it easier to buy and sell property in PNG. One way to do this is to boost real estate’s standing as investment class.

‘In PNG, we don’t have the large-scale property trusts that give overseas investors exposure to the property market,’ he observes.

Such trusts, which are common overseas, could involve packaging up ‘some of the premier grade-A property into a real estate investment trust (REIT) and providing overseas investors with a mechanism to purchase into that trust.’

Not only would this give international investors access to PNG beyond the existing share market but would also provide the sector with a new source of capital.

Bray says one of the association’s sub-committees is currently researching how to introduce REITs in PNG.

‘The big guys have committed some decent funds to enable us to do engage experienced consultants, international consultants if we need, because financial engineering is not an easy thing to do, and we should leverage the very best from around the region.’

Planning

Bray also notes that, while municipal authorities such as the National Capital District Commission, have done ‘a lot of work’ on urban planning (such as Port Moresby’s recent Urban Development Plan), the association has the expertise to assist and support this activity.

‘All of us developers have a degree of international exposure, and we can bring to bear our experience.’