THE PROPERTY DEVELOPMENT REVIEW
Newstead was also impressive. As was Scott Lai’s purchase of one the best mixed use projects in the Aviary, High St Toowong for $53M. Current significant development opportunities include Newscorp’s Bowen Hills site, The Queensland Government’s potential 143,000 sqm of Gross Floor Area on 4 HA on the Brisbane River at Hamilton Northshore and Crown’s 1.2HA approved 473 apartment project on the Brisbane River at West End. There is very significant pent up demand for accommodation due to the strength of the domestic migration and wealthy immigration and this is likely to continue for some time. Who were the most active buyer and seller groups in 2023? Was there a depth of off-shore investment and from which countries did you see most investment flow? The most active buyer groups this year were predominantly equity buyers who are not relying on debt to fund acquisitions, locals, including high-net-worth individuals & Family offices. These groups displayed a strong appetite for various types of properties, with a notable emphasis on residential and industrial assets. In terms of sellers, there was a diverse mix of participants, including property developers looking to capitalize on completed projects, as well as individual property owners looking to leverage favorable market conditions. Regarding offshore investment, there was indeed a notable depth of interest from foreign investors. Among the countries that contributed significantly to off-shore investment were Singapore, Vietnam, Japan & US. These nations demonstrated keen interest in Australian real estate, attracted by factors such as economic & sovereign stability, a strong rental market, and potential for capital appreciation. Overall, a diverse range of buyer and seller groups, both domestic and international, contributed to the vibrancy of the Australian property development market this year. The year wasn’t without its challenges; namely a volatile interest rate environment, building cost pressures, supply chain issues to name a few, but there appears to be some relief in sight. What is your outlook for 2024? I am bullish for the future. The credit departments of the four major banks currently have a strong influence over peoples capacity to invest. The property market will experience a significant up lift when money is more affordable and accessible. Next year, there are reasons to be cautiously optimistic about the Australian property development sector. While challenges such as a volatile interest rate environment, building cost pressures, and supply chain disruptions have been prominent, there are signs of potential relief on the horizon. Pent up demand due to continued population growth must be satisfied at some stage. Brisbane’s economy continues to outperform, with Queensland’s gross state product increasing threefold over the last 30-years, exceeding Australia’s GDP growth over the same period. The economic expansion has supported the labour markets and promoted significant population growth, upward of 112,000 people relocated to Queensland between 2020-22, predominantly driven by migration (+58,078 people). This growth in population is expected to sustain demand for corporate space in the long-term, offsetting a slowdown in consumer spending. Additionally, a tight labour market has further bolstered growth. While services price inflation continues to rise rapidly, the surge in oil prices has contributed to an escalation in fuel costs over recent
months. Moreover, geopolitical risks have heightened, with the outbreak of the Israel-Gaza conflict. Any escalation of this conflict has the potential to push oil prices higher, posing an upside risk to inflation, albeit with a possible adverse impact on global economic activity. The expected stabilization of interest rates, along with ongoing government support measures, is anticipated to provide some level of stability to the market. Additionally, as global supply chain issues gradually resolve, this could alleviate some of the cost pressures and delays experienced in the construction and development process. In summary, while challenges persist, there are positive indicators for the Australian property development sector in the coming year. A combination of market stability, technological advancements, and strategic market positioning can help developers navigate and capitalize on the opportunities ahead. Which asset classes do you anticipate leading the charge in 2024? In the new year, I anticipate that the residential and industrial asset classes will continue to lead the charge in the Australian property development sector. 1. Residential Properties: The demand for residential properties is expected to remain strong, driven by evolving lifestyle choices. Suburban and regional areas are likely to see continued interest as remote work arrangements persist, and buyers seek more spacious and affordable housing options. 2. Industrial and Logistics Properties: The industrial sector will continue its upward trajectory. The growth of e-commerce and the need for efficient supply chains will continue to drive demand for warehouses, distribution centers, and logistics facilities. This asset class is expected to remain a focal point for investors seeking stable and recession-resistant opportunities. While these two asset classes are anticipated to lead the way, it’s important for developers to stay attuned to evolving market trends and emerging opportunities. Factors like sustainability, technological integration, and demographic shifts may also influence the performance of other property segments. Thinking specifically about the development site space, do you see more activity opening up in 2024 given interest rates and building costs seem to have peaked and will most likely stabilise or reduce? Yes, the stabilization or potential reduction in interest rates and building costs can be expected to stimulate more activity in the development site space in the new year. These factors play a crucial role in influencing the feasibility and profitability of development projects. With interest rates stabilizing or potentially decreasing, developers may find it more attractive to invest in new projects. Lower borrowing costs can improve project viability and increase the return on investment, which in turn may lead to an uptick in activity in the development site market. Similarly, if building costs begin to stabilize this could alleviate some of the cost pressures that have been a concern in recent times. Overall, the combination of more favourable conditions are likely to instill confidence in developers and investors, leading to increased activity in the development site space in the coming year. It’s an opportune time for those looking to initiate new projects or acquire quality developments.
November / December 2023 – 89
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