VIC MARKET OVERVIEW
VICTORIA
VIC Market Overview with Cushman & Wakefie l d Lukas Byrns & Marcus Neill
What types of properties are in most demand?
housing product within a desirable suburb given the strength in established house prices. Locations near the middle ring and within the inner east, north and south-east remain in highest demand. What do you see as the biggest challenges that face buyers and sellers in today’s market? The greatest challenge facing the development industry is the increase in construction costs experienced over the last 12 months and to a lesser extent the increase in interest rates which have come off a record low base. Although the cost of finance has risen and lending has become more challenging, there remains a wave of capital available, particularly from the non-bank lenders who remain active and willing to lend to developers with a strong track record. Despite the apprehension in the market, primarily the result of the aggressive nature of monetary policy levers being pulled, the Australian Economy maintains a positive outlook. Pricing in the markets would suggest that expectations for both inflation and interest rates in the medium term, are likely to settle at more palatable levels from next year. Who have been key investors over the last 18 months, and have you seen a shift from previous years? Key investors have predominantly been in the BTR sector, and it is hard to ignore this rapidly emerging and exciting sector. Groups are well capitalised, many of which have raised equity through institutional capital on a global scale. We are currently tracking over 40 groups seeking to have exposure to this sector and we have concluded
A significant amount of our recent activity has been in the Large-Scale development site market (200+ apartments) with sites in locations including Brunswick, Fitzroy North, Docklands, Preston & North Melbourne. The larger 200+ unit sites are benefiting from the emergence of the build-to-rent (BTR) developers who are representing between 70-80% of the interest in these sites. Sites within 1km of a major train station which can benefit from strong local amenity and can be staged (between 8-15 levels) continue to be in the greatest demand spanning from the CBD fringe to the middle ring. Boutique apartment developments of up to 150 apartments are being sought by developers for the build to sell market ensuring development site values are remaining strong in these in demand CBD fridge locations including Fitzroy, Collingwood, Richmond, St. Kilda & Brunswick. There has been a flight to quality for sites in these prime CBD fringe locations where outperformance in revenues can be achieved to off-set the rise in construction costs. We are also witnessing an increased appetite for affordable first home buyer locations within the inner west and the north such as Preston, Thornbury & Footscray where a significant divergence in established house prices exists when compared to apartments. Infill Townhouse sites remain desirable and highly competitive given the lack of quality opportunities and the ability to provide an affordable alternative
LUKAS BYRNS Cushman & Wakefield
MARCUS NEILL Cushman & Wakefield
62 –Summer 2022/2023
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