Issue 28 | The Property Development Review

The Property Development Review

He foreshadows a booming year for commercial real estate agents, a resurgence of the three and a half to four star hotel market, Melbourne’s CBD returning strongly towards the end of next year and a flat year for Chinese investment in Australian property. “There is a strong investor appetite for de-risked commercial real estate developments like health care, child care fast food, petrol stations and the like. There is also an appetite out there for smaller riskier dealswhere youmight buy an office building that’s half vacant or youmight buy a set of shopswhich are vacant,” Wizel said However, these are forecasts for just 2022. “Whether it’s sustainable or not I’mnot sure. If you ask me to give predictions beyond 2022, I’d say I’mprobably not as confident,” he said. Marco Gattino, managing director of Goldfields Group, sees post-COVID investor interest in the Gold Coast and Brisbane markets. He said they will be the most favoured markets over the next couple of years. “Wewill see a lot of international investment demand for Brisbane and beyond that, oncemigration starts to trend in the right directionwith international borders becomingmore free,” Gattino said. “It will start to deliver rental growth and price appreciation.” Danny Avidan, founder and director of the DARE Property Group said the market will continue to be strong particularly at the upper end, regardless of whether interest rates go up next year or not. He said the uncertainty that comes with speculation of rate rises will not last long as the rises will not be substantial and they are unlikely to affect the premium end or middle market. “There is awhole lot ofmedia hype about interest rates going upwhich is creating some uncertaintywith purchases but that won’t last long because at the end of the day, even if interest rates go up fromthemiddle of next year, if you are looking at a $1millionmortgage and add 1% to it, its $10,000 and it’s not the end of the world,” Avidan said. He said there is plenty of investor appetite and demand but many sites coming on to the market now are prohibitively expensive. “There is a shortage of good sites at reasonable prices,” he said.

He said the ideal pockets of geographic interest for inves- tors and the market are in areas that are in iconic locations with good views and in proximity to a village of shops and facilities. And with houses becoming more expensive, there is growing demand for large demand for large apartments. “At themiddle to premiumend of themarket, people are looking for good facilities,” he said. “Theywant a home office, theywant outdoor areas, theywant an extra powder roomand bathroomand house-like facilities in apartments. “If you are able to provide large apartments inkey iconic locationswith views and proximity to a village then you are going to be able to dowell and sell well.” Deal Corporation managing director David Kobritz said while the huge amount of liquidity in the market is a positive, the development sites are going for very high prices. ”It’s a pretty dangerous state of play at themoment because on our assessment fromwhat some of these sites have sold for, developers are going to be doing it for very smallmargins." Kobritz said. “At the same time, there is very evident cost pressure in themarket place nowwhere prices have increased over the last sixmonths and going forward that situation is likely to exacerbate even further. To ourway thinking, we are in a pretty dangerous climate at themoment. “I wouldn’t be like to be out there trying to buy development sites or be in a pre-salemode because I think youhave very competing interests in terms of cost pressures, land prices have gone up enormously, constructionprices are going up and are likely to continue to do so for at least the next 12months. “What all thatmeans is the end price for the consumer has to increase. Theymight be at the top end but the bulk of themarket, what I call 95%of themarket, is very price conscious, I think that’s going to be hit very hard.” He said this means consumer demand in the residential space will be limited. However, he foreshadows big demand in the commercial space. “Investors, who have got the cash and are sitting on cashnot earning a lot, are considering their long term position. Theywant security of income flowand are out in themarket place paying highprices, lowyields forwell-located andwell-leased stock, whether they’re retail or commercial or industrial,” he said.

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