Property developers are refocusing their pipeline strategies away from high-density CBD sites to hone in on DA-approved boutique developmental sites three to 15 kilometres from Melbourne’s CBD, according to new data from PermitReady.com.au, Australia’s leading online portal for multi-sector development-approved and development ‘potential’ sites.
New figures from Permit Ready reveal interest for middle ring development sites in Melbourne have increased by more than 60 percent in the 12 months to October 2016, as rising house prices push up demand from families for townhouses and apartments.
“Our results show that in the past 12 months developmental-approved land offerings averaging nine kilometres from Melbourne’s CBD is consistently attracting strong enquiry levels from both developers and investors,” Permit Ready’s Managing Director Nick Materia said.
“Additionally we have noticed a number of leading development groups focusing on delivering townhouse projects over apartment products. In part this is a result of financial constraints, supplier demand, pre-sales demand and efficient construction timelines and the reduced costs associated.
“Competition is still tough but high-quality opportunities are opening in suburban regions as CBD investment and construction is pulled back in a bid for companies to take on less risk,” Mr Materia said.
PermitReady.com.au Founder and Director Nick MateriaThe Permit Ready team has helped to facilitate scores of Australian deals over the past year, with the development portal’s total property listings exceeding $2.5 billion fed from more than 400 real estate agencies across the country since 2015. $1.8 billion of those listings was showcased during 2016.
Mr Materia said CBD sites are generating “consistent” levels of enquiry but noted a sentiment change in some industry areas.
“Due to the upswing in suburban demand, we believe some developers are considering CBD site opportunities as “buy and hold” investments with prime CBD land purchases continuing steadily, but buyers opting to reserve the assets for the next property cycle,” he said.
“The CBD market can be considered crowded, and the results show many developers and investors are looking further out for a quicker return which is highly achievable during the current cycle,” he said.
In the past month Permit Ready partner, Savills, has sold more than $20 million of inner suburban sites, including a 425 sqm site in Heidelberg, 13 kilometres north east of the CBD for $5 million with a permit for 20 apartments and retail.
Savills Associate Director Jesse RadisichDirector of Metropolitan Sales Jesse Radisich, said a townhouse site in Wollert sold for a “strong” $1.55 million, or $70,000 per site.
“We expect completed townhouses to be in the mid to high $300,000 range,” Mr Radisich said.
Mr Materia said the company’s strong 2016 results could be indicative of changing buyer preferences as a result of housing affordability.
“From our conversations in the market, we believe families are less focused on the “Australian dream” of a big home and backyard for the children, and instead indicating townhouse developments as their preferred dwelling.
“The full-time, double income family required to service many mortgages means the trend of low-maintenance living has increased, and developers are delivering projects based on that demand,” he said.
Mr Materia said popular suburban townhouse projects currently out in the marketplace include Oliver Hume’s 20 townhouse Parkville project, Wolf Projects with its 12-townhouse project in Richmond, and Gurner, set to deliver 40 owner-occupier apartments in Collingwood.
Mr Materia said PermitReady.com.au regularly refers in excess of 50 enquiries per property directly through to its agents’ clients with strong conversion rates.