Issue 27 | The Property Development Review

Market Overview - NSW

NSW Market Overview from Alex Mirzaian CBREWestern Sydney Q. What are the key market trends occurring throughout 2021 in your region?

A. Property owners are viewing this market at present to be at the top of the cycle. We are seeing investors and developers who we thought would never sell, transacting at record prices. The commercial decision to sell in todays market is reaping profits far greater than developing or repositioning assets, however, the opportunity cost of the money remains uncertain given low stock levels and the highly competitive sellers’ market. Medical, childcare and places of worship requirements emerging as we surface from lockdown, and its evident these groups are nowmore than ever competitive given a lot of the Asian markets’ capital influence has left the West. Q. What have the been the fundamental drivers of demand amongst buyers? A. Lower than normal listings in the marketplace are underpinned by low interest rates that is driving capital into faster turn over development opportunities. With the lowest ever development approvals, planning continues to cause delays combined with land values surging, many developers are seeing profits in the prospect of trading out rather than delivering. The private client space is seeking superfund opportunities with low returns in banks, crossed with huge demand across urban re- lease land influencing both the commercial and residential development markets into record territory. Q. Reflecting on recent transactions, what has been the profile of buyers and has this shifted from previous years? A. New lines of local capital, developers backed by institutional opportunity funds has given financial confidence a doorway to profits, being driven by the demand for housing. With reflection on our market’s transactions, it is obvious the market is steered to the low to medium density development. We are starting to see that sentiment shift buyers away from passive long term capital growth opportunities into Devel- opment approved shovel ready projects, more so now than ever with building regulations tighteningWestern Sydney developers are wanting to keep their trades and building teams together be able to roll into the next job. Q. What types of assets are most in-demand given the current environment? Low to medium density opportunities and approved residential apartment sites in good locations, subdivision sites have been by far the most sought after, even across greater NSW including regional markets. This has stemmed from the building industry changes and the sentimental shift from apartment living to home and land being catered for in new release areas in the South West of Sydney bringing affordability and alternative options for buyers to the market. Q. How would evaluate the impact of the past eighteen months in your local market? A. The Western Sydney development and Investment market has experienced little to no impact from covid surprisingly, given these were

the areas of highest concern during lockdown. First quarter of 2021 had extremely strong sentiment from buyers, and even during lockdown periods we found developers to be more focused on sourcing projects as construction was on hold. Assets with holding income and development approvals supported by developers funding partners opened the prospect of future investment. We have seen new entrants with unique medical, childcare, and special use projects emerge following C19 trends. Q. What are your expectations for the commercial property market over the next twelve months? A. There are signs that price and lending growth is attracting the attention of regulators with some formof reforms of and intervention looming in 2022. High debt-loans likely to be the first target, it is inevitable that there will be some slow down in the growth pressures over the course of Q4 2021 and into the first half of 2022 and although the fundamentals in the market remain positive this growth rate cannot be sustained. Median house prices up $1.41m and commercial yields at record lows seeing deals done in the sub 3.5% commercial investments with development upside. B. Supply levels will remain key; whilst we continue to see the roll off effect of the housing stimulus boosting detached homes, the long lead in times for apartment approvals and off the plan sales rates will provide only modest level of supply over next year. Immigration talk may accompany another spike in the affordable apartment markets in Western Sydney given the price gap between apartments and house prices. Q. Talk us through the most significant deals you have transacted thus far in 2021. First half of 2021, transacted over $300,000,000 of deals across South Central and North West markets Various asset types, from freehold investments with upside, to large scale DA approved apartments and housing sites in growth centres. Extremely strong Q3 2021 with over $190,000,00 of transactions across 25 deals specifically in Western Sydney. Very proud of the team and extremely lucky to be surrounded by a very talented group of salespeople. Few notable transactions of 2021 are as follow: A. Clydesdale Estate in Marden Park $70,000,000 + sold from BHL to Stockland in the first quarter of 2021 B. Sale two apartment projects and large 121 lot housing site in Pemulwuy, the formally known Boral site totalling $100,000,000 across three deals. C. Landcom Epping Project - Transacted to Dasco constructions 450+ apartment development (State significant development project) driven and represented on behalf of Transport NSW and Sydney Metro.

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