THE PROPERTY DEVELOPMENT REVIEW
We still have very strong enquiry for the investment market, however many investors are choosing to park capital in the short term, to see where this market stabilizes. As with the metro markets, rising interest rates will see yields softening, however the Sunshine Coast is unlikely to feel the pinch as hard as some other regional areas given our incredibly strong underlying growth story. What market sectors do you anticipate being most in demand over the next six months? In our region, scarcity of land will remain an issue. We may see some higher density in key corridors in the medium term, however this is unlikely to be the silver bullet that we need to spur the strong growth we are expecting. In residential terms, the Sunshine Coast is expected to be home to more than 500,000 people by 2041, requiring an additional 217,000 dwellings. At present rates, the region will fall well below that target. This, in turn, will continue to put additional pressure on housing prices and rental rates across our region.
We already have a shortage of industrial land, with constrained supply set to continue into the future. So, it is unlikely that we will see land values dropping significantly, across all sectors. We are also unlikely to see another completed office tower in our CBD before late 2025. Considering our existing low vacancy rate, this will certainly limit our ability to supply larger office requirements in the short term. What advice do you have for any prospective developers in the current climate? On the residential front, whilst we still have significant constraints around building costs, supply chain issues and the like, there is an extremely strong growth story that underpins our region. We are still seeing new builds come out of the ground, despite the economic headwinds. As long as developers are able to keep the end product in an affordable price range, the sector will continue to move - and at levels not too far off the market peak. There is certainly still opportunity at the luxury end of the market, with downsizers and ‘Baby
Boomers’ cashing out of a family home into luxury apartments. This category is typically unaffected by the wider economic environment and interest rate rises. In terms of commercial, leasing activity is growing, so there should still be some good opportunity for design and construct projects in the industrial space. How have your marketing strategies changed, if at all, over the past 12 months? We have noticed that EOI campaigns are falling short in 2023, with many buyers not wanting to spend a lot of time competing in a process unless they are confident that vendor pricing is realistic. We have switched a couple of campaigns to private treaty, with pricing advertised and this has certainly made a difference to enquiry levels. For development sites, buyers are expecting a significant level of due diligence material readily available, including town planning reports, so this is a cost that needs to be considered by vendors prior to taking property to market.
March / April 2023 – 71
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