Blockbrief Development Update March 2015

18/03/2015 10:38 am
by Michael Radovnikovic on March 18, 2015

With unprecedented auction clearance rates in Sydney in 2015 with a consistent 80% plus has seen the Sydney market surge with investors into the property market. From a development perspective, Sydney residential land is in the middle of a renaissance.

tall-craneWe are seeing population growth, new housing product hitting the market and a state government ready to lose their jobs over aggressive growth strategies. It’s not the post-war era, it’s the post-GFC era.

Development in Sydney’s growth centres has surged in both the north and south west. New retail land prices in the South West are now catching up to their northern cousins at over $1,000 per square metre and rising. Predominant developments in the Liverpool and Campbelltown LGA’s are benefitting from this. Agents are telling us wholesale land has tipped $1M per acre and climbing along. Sydney’s northwest growth centre is propelling at a rate of lots. Thousands of lots are under construction with newly crowned developers taking advantage of their legacy landholdings and chopping up land. Developers are telling us wholesale land has tipped the $1.1M-$1.2M per acre in some areas but no real settlements to back this up yet. Some new house and land packages are selling for over $1M for a 450m2 block and a 4 bedroom house.

Sydney’s apartment scene is also increasing by the day. Development approvals are at a peak and Sydney City Council, Botany Council, North Sydney Council and Ryde Council are seeing many more inner city and city fridge developments taking advantage of the existing infrastructure equating to lower infrastructure costs for lead in works. Agents are telling us that DA approved sites in the inner city and city fringe are wholesaling at well over $200,000 per unit but this may be the new norm where insiders have reports of several off the plan 1 bedroom apartments in Chatswood retailing at over $800,000.

Commercial property in both Sydney and Melbourne is suffering. The Sydney CBD has peak vacancy rates and yields have been softening since the GFC. The rise of the pop-up store will not be able to sustain the landlords through the retail slump but in the new Barangaroo, Chifley and Castlereagh Street precincts, these new developments have courted many of the A-Grade leases most sought after for much tighter longer-term yields closer to the 6-7% bracket. Hence we are seeing more residential towers appearing in the Sydney CBD as a result of underperforming office stock.

The Melbourne growth corridors could have been referred to as land banked farms over the last four years. Only now are we seeing some momentum in the very large masterplanned community areas in the Northern Growth corridor and the like. It’s a slow pick up and will remain low growth for some time due to the saturation of similar product and quantum of ready to develop land. The Melbourne CBD is still running hot with thousands of apartments with planning approval and many still being assessed for approval. The sheer number of apartment sales since 2008 has been enormous and driven their economy out of the red. While sale rates and slowed down in the Melbourne CBD, it has forced developers to look at their customers more and gain a better understanding of how they want to live their lives in the city long term. Ultimately, the type of product, amenity and lifestyle influences have greatly influenced the attractiveness of apartment living from owner occupiers as $/m2 values softened between 2011-2013 along with rental yield. Sydney has looked to Melbourne for some lessons and the product being offered in the city and city fringe very much includes the social infrastructure and lifestyle amenity that customers are now expecting.

 

About Michael Radovnikovic

Michael is a co-founder of Blockbrief and heads up market research, analysing the impact of zoning on the market, development market conditions, demographics and economic trends across the county.