THE PROPERTY DEVELOPMENT REVIEW
time to secure sites now as a result. What market sectors do you anticipate being in most demand over the next 12 months? We expect demand to not necessarily be driven by a development site sub sector, but moreover on quality versus secondary stock. Market fundamentals are very applicable in the current market. If the development site is well located, close to existing amenity and can be delivered with a lower level of external risk (planning, infrastructure etc.), strong interest is being received and we have witness firsthand some very strong results. If the site occupies a secondary location, may have servicing or town planning challenges, or the target product type is marginal for the location, buyers are penalising much more heavily than they did in say 2021. We expect both these demand trends to continue in 2023. With the huge population growth expected in Melbourne driven by record levels of overseas migration, how do you see this impacting the various development markets in greenfield, townhouse, and apartments? Melbourne is heading, if not already arriving, at a major residential supply
crisis that will become very political over the next five years. The data on rental increases is skewed due to the rent correction witnessed in COVID in the CBD and inner suburbs. But the vacancy rate at 0.8% says it all. Supply of new housing dipped 27.5% in 2022. 2023 will see this trend continue, as build prices and a more expensive and risk adverse funding market is making it much harder for new projects to be delivered. So in say 12 months time, we will have more people in Melbourne, but housing supply will have fallen even further behind. Rents and capital values will increase as a result, and this should increase the number of projects that are viable to be delivered. But it then takes time for this stock to get to market, so having a healthy pipeline will be strategically important for developers to be ready to meet this demand. As an expert in the field, what advice would you provide to a Developer with a budget of $10 million on identifying potential investment opportunities in terms of site selection and location? There are opportunities in all sectors, but you must be active in participating in processes and making offers. It is not a market to seek only off-market stock, as an example. The on-market processes will see the greatest deal
flow in 2023 and developers who are active, make straight forward offers on shorter terms, will be rewarded with acquisitions. In light of the affordable housing crisis, what measures do you think should be taken to encourage the development of more affordable housing, and what role can Developers play in this? In 2017, stamp duty concessions for off-the-plan sales were removed and the apartment market changed overnight. Demand from investors to buy new apartments was dramatically impacted and has not recovered since. What this did was significantly reduce the supply of what would be investor grade apartments, proving more affordable housing options. A 65 sqm two-bedroom apartment in an inner city or middle suburban location is the best form of housing to help address affordability. The industry has already been very vocal on this point, and hopefully it will start to get more traction from a policy perspective at government to assist developers to attract more off-the-plan purchasers.
April / May 2023 – 49
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