What opportunities for property development does 2019 present?

New Insights

Welcome aspirant property developers, development site owners, agents and consultants to the property development industries. Identifying and assessing new opportunities in the new year is a key challenge...
What opportunities for property development does 2019 present?
Engaging in successful and profitable development projects is a strategic and long term process, and requires expertise, planning, patience and a little good fortune. Identifying potential development opportunities in the small-medium scale ( i.e. sub $10m total development cost) residential, mixed-use, industrial, retail and commercial office in 2019 will require good anticipation of market sector trends and mitigating key risk aspects of property development.

"As safe as houses"?
The residential property market is five-fold significantly larger in value than the non-residential market in Australia, a lower barrier of entry in terms of expertise and capital requirements, unsurprisingly attracting most novice investors/developers. The Sydney dwelling market evidenced strong growth of 72% over five years from July 2012 to July 2017 (source: CoreLogic) and has retracted 8.8% to 13.3% across metro Sydney during 2018. However, values are still well above the July 2012 recent low when smart investors were acquiring development sites.
This growth spurned many’” Get Rich Quick” and “Leverage yourself to the max” seminars, creating a culture of FOMO (fear of missing out), recently replaced by FONGO (Fear of not getting out).  Some of the key drivers creating this scenario (lending standards, SMSF trends, supply, overseas investors, interest rates, tax arrangements) will change and may provide new opportunities for savvy developers.

Residential prices in Hobart and Launceston grew strongly, whilst dwelling values in some NSW, Victoria, Tasmania and Queensland regions increased by 3.8% to 11.4% in 2018 (source: CoreLogic). Opportunities will present in areas unaffected by an oversupply of apartments and speculative housing projects and may be small land subdivision projects that benefit the surplus residential building contractor supply likely as larger projects complete.

Back to the Office 
The office commercial market continued to deliver very strong returns in 2018 with record low vacancy rates in Melbourne, Sydney (since 200) and five years lows across the national CBD office markets. The lack of vacancy in the CBD markets and high rents will continue to drive leasing demand to well located metropolitan centres, especially those with new transport links to the CBDs. Smaller development projects will benefit from strong office leasing rates in small strata office suites remain strong.

The Perth CBD oversupply and vacancy has reversed, with smart investors have recently secured office building at significant discounts, aiming to benefit from the future recovery of resources prices and resultant office demand. Melbourne’s suburban office market increased circa. 34% in 2018 in volume sales terms, drive largely by high CBD rents, local and international investors.

Second Industrial Revolution
Retail property’s loss has been industrial property’s gain, especially with the continued online sales trend and third-party services requiring a wide range of low and high clearance warehouse space to service residential suburbs remote from main airports and ports. Demand continues to outstrip supply and vacancy declines and rents have increased over the past four years. Industrial land values have doubled in some locales, providing new opportunities for compact multi-level projects close to metropolitan centres.
Experienced developers are more confident with speculative developments which are achieving strong leasing results prior to completion, as evidenced in Sydney’s North West. E-commerce is forecast to generate a requirement for 350,000 m2 of additional new industrial space each year until 2022 (source: Australian Property Journal), although traditional warehouse and third-party logistics users will continue to be the dominant source of demand for a range of warehouse space.

Expanding your knowledge
Property Development Insights share the expertise of five experienced property development professionals in a boardroom setting limited to six people to ensure one-on-one engagement, sharing of techniques, review of detailed case studies followed by networking over a compact three-day course commencing 6pm Wednesday 20th February...
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