All-time high price gap causing potential development troubles

The gap between house and unit prices is giving confidence to higher-density developers but the greatest challenge will be sourcing deals that stack.

Corelogic’s latest report showed the gap hit another all-time high in January at 28.3 per cent—house prices increased 24.8 per cent and units were up 14.3 per cent.

GALLERY  

This double-digit apartment price growth pushed prices to an all-time high despite only increasing 0.3 per cent in January.

At the same time demand for dwellings continued to rise, SQM Research revealed rental vacancies hit a 16-year low in January at 1.3 per cent—and demand increased in every capital city.

However, finding profitable development sites was proving to be challenging, according to Foxwood Property managing director Clint Willoughby.

“The trouble is actually finding opportunities for developers. There’s so much confidence in the marketplace because we have all these different markets firing,” Willoughby explains.

“A lot of guys out there are holding sites, trying to achieve approved value figures for their sites that haven’t got DAs or VAs or whatever it might be.

“For the developers who have sites, there’s a real push to get them to market as soon as possible and capitalising on the prevailing market conditions.”

The project marketing and sales agency director said they were expecting the appetite for apartments to grow, particularly for space with good design in appealing locations.

“What we’re seeing is a once-in-a-lifetime housing boom,” Willoughby said.

“That’s causing buyers who … six months ago were looking for house and land … that’s out of their grasp now.

“So we are certainly expecting a number of strong years ahead of us for both housing and apartment markets.”

“The key factor of course is location. I think supply in certain markets is becoming a bit of a concern for buyers that are out there and the other key point is affordability.

“Rather than looking for that one bedroom or two bedroom apartment they are looking for that study space and that’s a key piece of advice we are giving developers.”

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