We recently attended an Australian Property Institute, NSW State of the Residential Market event and thought that it would be worth sharing some highlights with you.
Whilst the event presenters were pessimistic about apartments, there was cautious optimism about short-medium term in other market segments. Small lot housing, retirement living, and the “missing middle” product were considered opportunities. There were a couple of reasons highlighted:
· Foreign investment. As offshore demand falls, there is an opportunity for local buyers, to fill the gap. These local buyers have historically preferred lower density housing (e.g. townhouses, terraces and manor homes), presenting a market opportunity.
· Oversupply and building quality. Apartment strata buyers remain wary due to a combination of oversupply, flammable cladding and building quality issues (e.g. Opal Towers).
· Commercial feasibility. Some creative developers are responding by reducing densities and shifting to lower densities. The commercials make more sense. Whilst there are less homes to sell, they are cheaper, quicker to build and current sales volumes are higher.
Apartment cladding and settlement risk were “hot button” topics and worth watching from government, developers, buyers, valuers and banks perspectives. About 450 new apartment buildings have been deemed as “high risk”. Many have “off the plan” sales shortly due for settlement. There is still widespread uncertainty about funding for cladding rectification works, potentially leaving body corporates with a cost that may affect valuations.
In respect to the market broadly, the consensus was that we were “close” to the bottom of a price cycle, however it would not be until 2021 before prices increased.
There was also an interesting discussion about using “Build to Rent” as an option to de-risk a site. As well as providing affordable housing it was also considered a viable alternative to selling apartments in the current market, which looks set to remain tough for the next two years.
If you would like to explore how these changes may affect you, we’re happy to jump on a call to help. Grab a time with me here.