Melbourne’s population growth is inevitable. So why are we not building enough homes to support it? Rob Burgess from Charter Keck Cramer assists, coronavirus threatens hotels and build-to-rent projects are coming thick and fast.

EXPERT COMMENTARY

NEWS SUMMARY

Key Themes:

• Coronavirus threatens Australian markets and industries, particularly hotels

• Concern is rising over a slump in construction rates and development approvals. Supply could dwindle by 2022

• Build-to-rent developments are becoming more feasible, with many developers announcing new projects

Coronavirus

The Australian reported that reserved positivity regarding the country’s current residential market is being threatened by coronavirus impacts, as observed by JLL. Developers have cancelled launches of new apartment blocks aimed at overseas investors because of travel bans and reduced interest as a result of the COVID-19 outbreak. Whilst the extent of the impact is unknown, many predict that Australia’s economy, house prices and tourism sectors will take a hit. (Coronavirus adds note of caution to housing outlook – Mackenzie Scott, 26/02/20)

The AFR also reported on subdued market conditions in the tourism sector, with some hotel providers offering discounts of up to 40%. Recent forecasts predict that $1 billion could be lost each month Chinese tourists are banned from entering the country. (Hotels offer big discounts as revenues face viral blow – Larry Schlesinger, 27/02/20)

Savills made a series of predictions on the impact of coronavirus and the recent bushfires. Read the report on The Urban Developer: Fires, Virus to Drop Hotel Bookings 40pc.

Residential Supply

The AFR reported on the sustained high demand of first home buyers over last weekend, with high auction clearance rates in Melbourne and Sydney despite more than 1000 extra listings going under the hammer. (Surging volumes give little relief to buyers – Michael Bleby, 23/02/20)

Read about the weekend’s auctions on The Real Estate Conversation: Auctions continue their strong performance over the weekend.

The AFR also raised concerns over the future supply of homes. It reported that housing construction is at its lowest since December 2000. Total home-building fell 4.6% in the December quarter, and NAB economists predict that this may threaten GDP growth.  More optimistic economists expect improving residential prices to encourage construction of new homes towards the end of 2020. (Home building rate worst in 19 years – Michael Bleby, 26/02/20)

To alleviate supply concerns, the Property Council of Australia is calling for quicker planning processes in NSW, according to the AFR. The Council’s CEO Rod Fehring believes that following last year’s federal election, housing stock is being absorbed very quickly and new projects need to be undertaken immediately. (Call to fast-track NSW development approvals amid supply crunch – Nila Sweeney, 26/02/20)

Charter Keck Cramer has forecast that an apartment under-supply may eventuate in 2022. Read about their recent report on The Urban Developer: Apartment Supply Shortage to Hit by 2022.

Commercial Sector

Offices

The AFR reported that tight occupancy conditions in Sydney and Melbourne’s office markets will drive rents upwards and lower already-tight yields Positive news like this encourages investors to hold onto their assets rather than sell.  But this isn’t necessarily beneficial for the market, because it limits the stock available which reduces supply of re-investment opportunities. (Office rents to grow but limited opportunities to invest – Ingrid Fuary-Wagner, 25/02/20)

Retail

The AFR reported that Kaufland’s hasty exit from Australia is going ahead, with the announcement of that it will divest itself of nine mixed-use properties. Whilst it is a complex portfolio to value, Kaufland could receive as much as $250 million for the combined sales. (Kaufland hastens exit with portfolio sale – Nick Lenaghan, 27/02/20)

The Australian revealed that many retailers around the country are suffering slow sales and are demanding rent cuts as a result. With waning consumer confidence, the bushfires and coronavirus impacting the retail market, the Australian Retailers Association is lobbying landlords to reduce rents, or at least have a round table discussion, to avoid industry disaster. (Retailers demand rent cuts at malls – Eli Greenblat, 24/02/20)

Build-to-rent

CBRE analysts revealed that Australia is among the top five countries in the world whose markets support build-to-rent potential, as reported by the AFR. Australia’s demographics, job growth and population growth were all factors considered by researchers. But the capacity to host build-to-rent is significantly constrained. Complex tax regimes and high entry costs deter developers from undertaking these projects. (Plenty of potential for build-to-rent but support needed – Nila Sweeney, 24/02/20)

Read about recent build-to-rent ventures in ‘Qualitas, CEFC Launch $1bn Build to Rent Fund’.

PROPERTY ANALYTICS

Our property analytics includes a simple collection of graphs that we update monthly. We find that it provides us with a high level dashboard to assist us in keeping track of a selection of key statistics.

Feel free to check out our selection of key market analytics:

ARCHITECTURE & DESIGN

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To learn more about Debuilt Property please visit www.debuilt.com.au or email either Paul: pabrahams@debuilt.com.au or Daniel: dburger@debuilt.com.au.

Contact us via phone at +61 3 9988 1929.

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