NSW MARKET OVERVIEW
NEW SOUTH WALES
Grant Bulpett, Mark Litwin - Knight Frank
As we move into the second quarter of the calendar year, with fewer seasonal obstacles like Easter and public holidays in front of us, describe the sentiment among vendors and buyers across all asset classes and has there been a shift? I think we’re all excited about a longer run ahead of us here to close out the calendar year with more neutral, or stabilized macro conditions, compared to what we’ve been faced with the last 18 months. I think that’s across all sides of the transaction. With respect to buyers in particular, there’s a lingering sentiment that there’s still risk in those macros though, and that will continue to give some buyers pause, but those buyers represent much lower proportion of our general target audience. Vendors have been waiting patiently for these stabilized conditions too, and we’re likely to see more stock on the market in the coming quarters that will translate to more sales evidence to help bring the overall marketplace back to traditional transaction levels. With ongoing interest rate instability, have you seen an uptick in receiver stock and what’s the appetite from vendors to meet price expectations from prospective buyers? Certainly, there’s been a marked increase in the receiver stock. The increase is obviously a function of higher borrowing costs, higher construction costs, but also challenges within our state planning system, and the much- needed reform brought about by the building commissioner. I suspect this volume of court appointed sales process to continue to make up a well-defined portion of the listing activity, and
mostly in the metropolitan markets, although you will see some financial pressure in other markets too. Court appointed process are rolled out to resolve issues with a financial structure, partnership structure, or fundamental property strategy that is no longer viable. Each case is different and doesn’t always reflect financial distress. When a court ordered sale is brought to the market, it typically means all other avenues for resolution / consensus etc have failed, and the public sale through a trustee, receiver etc will drive a market based sales result. We hear that building costs have peaked but what does this look like in your respective market and have project feasibilities improved/declined? If so, what has been the overarching impact on demand and supply for residential development projects? Construction costs continue to present a challenge to all participants within the development value chain. Equally, buyer levels for finished apartment stock is steady but less than traditional levels. This combined effect of higher costs and longer running return periods are certainly putting pressure on the financial modelling. Overall, Sydney still struggles under the burden of a low supply pipeline, and transactions that we’re carrying out today are strategic footholds in high quality markets that developers can turn for stable revenue streams when conditions normalize, as opposed to a more general acquisition to fill a pipeline issue. In the first quarter of the year, we executed and or settled on over $400M of residential development sites, all of them very strong in
GRANT BULPETT Knight Frank - Partner, Head of Investment Sales, NSW
MARK LITWIN Knight Frank - Director, Head of Investment Sales, North Sydney
22 – May / June 2024
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