VIC MARKET OVERVIEW
VICTORIA
Peter Sagar, Paul Callanan & Darcy Tobin - LAWD
Thanks for the opportunity to share your insights - to begin, give us a sense as to how you’re finding transaction activity for residential development land sites as we approach the mid-point of 2024? It is clear that transaction activity within the residential development sector has decreased based on the number of sales that have occurred to date throughout 2024. Despite this, the fundamentals remain strong and there is an enormous level of capital seeking large scale residential sites that provide delivery certainty. Although transaction levels are down, LAWD’s market share has remained consistent within this sector, evidenced by the recent sale of the Cranbourne Golf Course which generated 20 written offers and over $3.5 billion in allocated capital to the opportunity. Clearly there’s an acute housing shortage across Australia - based on your conversations with developer clients, what’s their appetite for pursuing new opportunities & what are the underlying fundamentals they’re considering in their analysis. At present, there is a genuine flight to quality for sites which provide zoning and infrastructure certainty. The recently published Victorian housing statement only prioritised 5 future residential precinct plans (PSP’s), sites outside of these key areas are still in demand by a select pool of buyers however appear only to be transacting on the basis extended settlement terms can be achieved. There’s a number of challenges and pressures facing developers, not least the cost of construction, cost of capital & availability of land
- what’s your gauge as to how developers are mitigating some of these issues. These issues, in addition to a number of others, have been impacting developers particularly within the medium density sector. We have seen developers express interest in selling superlots given the slowdown in lot sales and the groups who are purchasing these sites more often than not have a preference towards single story dwellings in an attempt to reduce construction cost. The availability of land is and will continue to be a pressing issue for developers throughout all growth corridors. This will be challenging to overcome unless there is a radical shif toward the approval of additional PSP’s throughout Melbourne. As you know, the rise of build-to-rent (BTR) as an asset class has grown exponentially in Australia over recent years - how have you observed this trend & is there an opportunity for developers to pursue BTR projects from a residential land perspective? The market fundamentals of strong population growth, low vacancies, rental growth and an undersupply of dwellings being built make Australia, and Melbourne in particular appealing for the build to rent asset class. We have a major potential build to rent project coming to the market in Fairfield and have recently expanded our servicing area to capture this sector of the market with Lukas Byrns recently starting as a director. We have seen some preliminary activity exploring BTR projects in the growth corridors and as the metrics and regulatory landscape improve over time, we expect to see more BTR
PETER SAGAR Senior Director
PAUL CALLANAN Director
DARCY TOBIN Sales Executive
52 – June / July 2024
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