On Wednesday 2 March, nra-co-lab’s Melbourne office hosted the ‘2016 Melbourne Property Market: What You Need to Know’; with three local property experts from CBRE, Spiire and Deloitte presenting to developers on the current opportunities and challenges facing property moguls in 2016.
Attendees on the night gained knowledge on upcoming benefits, changes and challenges to the Melbourne market and received feedback on how to avoid and overcome these possible scenarios.
With attendees on the night providing positive feedback regarding the information presented, please read our article below as we summarise the expertise from our hand-selected presenters.
JULIAN WHITE – CBRE ASSOCIATE DIRECTOR
‘MELBOURNE PROPERTY MARKET 2016’
Julian White from CBRE noted the past 12 months have been characterised by increased land prices within the Melbourne CBD. These prices have risen from around $10k per sqm in 2013 up to approximately $20k per sqm for last year. This offset was bought about due to a reduced volume of land decreasing from over $1 billion, to approximately $200 million in total. For Melbourne, while prices have risen, land turnover is down as investor confidence and easy credit reduce, creating a roll on effect for the current market environment.
Specifically relating to the apartment market, completions are expected to grow significantly doubling over the next two years. This is based on unit demand and population growth, however increase is anticipated to be within the middle and inner suburban ring due to several related factors including:
- Banks preferring to fund smaller projects in good locations with reduced risk.
- Weak Australian dollar encouraging foreign investors.
- Very low percent of population living in apartments relative to comparable international cities.
- Affordability crisis of houses on land, with 84 Melbourne suburbs boasting average house prices over $1million.
The take home note from Julian’s presentation is, if you are wishing to invest then permitted sites are popular as they provide certainty of outcome whilst bragging an unique attractiveness to builder developers.
Travis Reed – Spiire Town Planners Senior Associate
‘Planning Changes Affecting Development Outcomes in Central Melbourne’
According to Travis Reid from Spiire, Melbourne is currently under planning changes across the city. In 2016 the Government rolled out the draft plan in Q1 with the final copy due in Q4. Changes being considered, with the actual policies still to be announced, include:
- Review of residential zones in suburban Melbourne. The goals aims to increase heights to 9m for NRZ and remove the current four storey limit for Residential Growth Zones.
- Apartment design standards in similar vein to Sydney’s SEP65. This focusses on daylight, sunlight, open space, outlook, natural ventilation and a performance basis for apartment sizes although no strict limit is in place.
- Amendment C262 – CBD height controls and plot ratios (24:1).
Looking towards the future, the Government will focus on spreading the apartment typology further across Melbourne, and maintain less focus on the CBD. Apartment living is aiming to be decentralised with a target of 70% of new housing stock to go into existing built up areas. In addition, code assessment for new multi-residential developments are to be introduced.
Stephen Hynes – Deloitte Director
‘Development Finance – The Changing Landscape’
After Stephen Hynes represented Deloitte it was apparent that Real Estate finance is shifting. These changes include:
- APRA changes to increase equity allocation for investment residential mortgages from 16% to 25%, thus increasing the price of capital.
- Owner occupied financing is increasing, with investment financing decreasing.
- Settlement risk is increasing, with banks requiring higher pre-sales requirements before providing finance.
- GFC fallout has increased the banks cost of finance.
- Banks are more selective in who, why and how much they lend.
In conclusion, Stephen remarks that these changes are driving non-bank capital lending, such as private funds searching for yield including SMSFs, private and offshore capital. For any property developers looking to secure finance for upcoming developments they should considerer sourcing finance widely and/or from diverse lenders to spread the risk.
Overall, the night was a massive success and we would like to thank our guest speakers for taking the time to share their expertise and everyone who came to the event.
If you are currently planning your next development project please call the nra-co-lab Melbourne office on (03) 8306 3588.