THE PROPERTY DEVELOPMENT REVIEW
activity in the growth corridors, many groups now active in Melbourne have significant housing and walk-up apartment build to rent projects in the suburban areas throughout North America and other parts of the world. Similarly, land-lease communities are another asset class through which significant capital has been deployed recently, particularly from large-scale residential development groups - how have you observed this evolution and do you anticipate further growth in these sorts of deals? There are several large-scale organisations who are actively pursuing sites of this nature. It is a major growth sector of the market which has been fueled by demand from our ageing population. It is widely known that 7-15 hectares is generally required by these groups and key criteria includes median house price hurdles as well as the livability / demographic of the local area. If appropriate sites become available land-lease developers have demonstrated that they have the ability to pay a premium above traditional metrics. We are of the belief this sector will continue to grow given our ageing population and acceptance of this model which is improving and increasing in popularity. Based on your discussions with vendors / potential vendors, how are they observing market dynamics in your region & to what extent do you expect an increased volume of properties coming to market over the course of the next six or so months? Discussions with current and prospective vendors is largely dependent on the asset class of the property. LAWD specialise in the sale of development sites across the mixed use, industrial and residential sectors and are therefore in constant communication with vendors on what we are seeing in the market. There is likely to be an increase in the volume of properties coming to market over the coming 6 months including non-distressed, distressed sales and opportunistic sales which offer potential for owners to recycle capital.
One of the defining themes over recent years has been the influx of private capital & foreign capital targeted toward commercial real estate assets - how have you observed this thematic & what’s driving this investment with reference to the residential land market? There are a number of major international capital partners who have aligned with Australian developers to deliver large scale projects. Despite several government interventions, the demand for land development sites throughout all growth corridors remains strong due to a number of factors including but not limited to immigration (including their buying preferences), affordability and potential to deliver projects of scale with staged cashflows. Australia is viewed globally as a safe haven for international investment with strong economic outlooks driven by population growth. Groups who have secured these capital partnerships are aware of these factors as well as the ongoing demand/ supply shortages which will continue to drive investment in the residential land market. In closing, are there any other investment trends or market themes that you’re analysing that are likely to have a material impact on values in 2024? The inherent relationship between consumer confidence, inflation, ability to secure finance and interest rate levels will have a material impact on market values moving forward. The established market has proven to be very resilient. Buyers in all sectors of the market are being pushed to certain price point levels and affordability is a key driver. In the greenfield sector, there is a significant level of pent up demand which continues to build but a reduction of interest rates may be required to see material impacts on values.
June / July 2024 – 53
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