Covid-19 Changes Demand in Residential Land Market

Uncertainty surrounding the livelihoods of first home buyers has hit the residential market with both private and ASX-listed residential land developers reporting a big drop in sales volumes due to Covid-19.

What started as a strong year for sales quickly turned with Stockland reporting a drop in enquiries by 20 per cent in March with the quarter’s net deposits ending 17 per cent lower than the December quarter.

Private residential developer Satterley Property Group also reported a drop in sales volumes due to Covid-19 across their projects in Western Australia, Victoria and Queensland.

Meanwhile the construction index fell to its lowest point as Covid-19 slows activity on building sites, causes new orders to drop and changes developer yield.

However there were many “sensible opportunities” for developers according to Satterley Property Group chief executive Nigel Satterley who joined The Urban Developer as part of a webinar series on Thursday.

“I’ve never seen such a fast turn in consumer confidence, over a million people have been unemployed or given redundancies,” Satterley said.

“People between 25 and 35 are very uncertain about the future.

“So we have put things in place to work with the home builders to keep going.”

Satterley added although most of their buyers were owner-occupier investors may look at properties again as a “sophisticated” option for their portfolio as house prices were far less impacted by the pandemic.

The developer of more than 40 years said moving ahead it was all about managing stock supply, looking for growth areas and using social media.

“This is the most difficult cycle but the market never stops,” Satterley said.

“You’ve got to have good value, very low interest rates and you’ve got to have low gearing property.”

Buyers were also looking at their options for home-offices, layouts and backyards to facilitate post-pandemic living and working however the volume of land sales in the short term were expected to drop.

Satterley said in the long term the number of people looking for house and land instead of an apartment could rise by 5 per cent in most states except Sydney which was undergoing a price correction.

“So what we see through Covid-19 is people are going to think twice about if they wanted to live in a crowded apartment,” Satterley said.

“There will be a change homes are going to have less rooms but bigger rooms and high ceilings for ventilation.

“These people who have kids home, they're cooped up from 4-8pm driving them nuts, so they'll want a study area.”

The residential developer added backyards were also a big draw cards for young families and homes with two or three car spaces were popular as children stayed at home into their twenties.