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Offshore Interest Accelerates Build-to-Rent

Offshore

Australia’s booming build-to-rent development industry grew almost 70 per cent in the past 12 months off the back of substantial offshore investment.

CBRE’s build-to-rent development pipeline report estimates the market is worth about $10 billion with 40 projects and almost 15,000 apartments in the pipeline.

Offshore institutional investment currently accounts for 57 per cent of the funding of build-to-rent developments. But with recent changes to tax concessions in New South Wales and Victoria it is expected more Australian banks and investors will funnel money into the asset class.

“We expect the momentum to be maintained with more projects announced as developers work through a pipeline of several thousand units currently under due diligence and taking advantage of recent tax reforms enacted in NSW and Victoria,” CBRE associate director Puian Mollaian said.

“Offshore institutional capital has been critical to support the launch of the first generation of projects in Australia. Almost two-thirds of projects announced have secured equity capital from global investors, mainly those based in North America and Europe.”

Offshore

▲ Build to rent investor profile. Image: CBRE

Mollaian said Covid-19 had stimulated further interest in build-to-rent from developers and investors in addition to planning incentives and tax reforms in New South Wales, Victoria and Queensland.

“Locally, preliminary data from the first wave of projects’ performance during Covid-19 indicate a level of resilience as evidenced by broadly stable rents and occupancy levels,” Mollaian said.

Melbourne continues to lead the way in the build-to-rent sector, with more than 50 per cent of projects in the capital city, including Assemble’s East Village development (artist’s render pictured above) on a 4.3ha former industrial site at Bentleigh East.

Sydney accounts for about 25 per cent of the national market.

Mollaian said Victoria and Queensland offered the most opportunity for Build to Rent due to the availability of “suitable development sites and lower barriers to entry in comparison to Sydney” where prices remained high.

Offshore

▲ Build to rent market share by state. Image: CBRE

CBRE Debt and Structure Finance managing director Andrew McCasker said it was encouraging to see traditional lenders and non-bank lenders allocate funds to the growth sector.

“We expect funding appetite to increase as the asset class, and knowledge of the industry, evolves and matures in Australia,” McCasker said.

The Property Council of Australia welcomed the change to New South Wales’ planning laws to help stimulate the build-to-rent sector further.

“Build-to-rent delivers much needed housing supply, is good for renters, keeps jobs in construction and is also great for our economy,” PCA executive director for NSW Jane Fitzgerald said.

Fitzgerald said the changes would provide a shot in the arm for build-to-rent in NSW by providing a planning and tax framework designed specifically with the new sector in mind.

“The planning changes not only acknowledge that build-to-rent is a different housing ‘product’ to build-to-sell but also provide clear guidance to investors, developers and consent authorities.

“The tax changes will improve certainty for investors and remove disincentives that would have held the sector back.”

 

Article Source: theurbandeveloper.com

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Brisbane

Brisbane Housing Market Insights: February 2021

Brisbane Housing Market

Brisbane housing market insights for February reveals increased demand for houses has been underpinned by increasing consumer sentiment and a surge in interstate migration.

This resource, to be updated monthly, will collate and examine the economic levers pushing and pulling Brisbane’s housing market.

Combining market research, rolling indices and expert market opinion, this evolving hub will act as a pulse check for those wanting to take a closer look at the movements across the market.

So, what were the highlights across Brisbane’s property market throughout January 2021?

Brisbane median house and unit price values

TypeMonthQuarterAnnualMedian
All0.9%▼2.5%▲4.0%▲$527,826▶
Houses1.0%▼2.9%▲4.9%▲$583,902▲
Units0.4%▶1.0%▼-0.4%▲$393,177▲

^Source: Corelogic Hedonic Home Value Index – January

Brisbane housing market affordability

CityHousehold income to meet mortgage repayments September 2019Household income to meet mortgage repayments September 2020
Brisbane21.0%18.7%

^Source: Moody’s Investor Services – October

Brisbane prestige property ranking

CityGlobal ranking3-month change12-month change
Brisbane23rd-1.4%▼1.1%▲

^Source: Knight Frank Prestige Property Index – November

 

Article Source: theurbandeveloper.com

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Opinion

What’s different about this property boom?

property boom

If not for the backdrop of a global pandemic, you could be forgiven for feeling a sense of déjà vu as the property market shows all the signs of launching into yet another boom.

Auction clearance rates are at near-record highs, bankers are rubbing their hands together as lending takes off and many economists are predicting double-digit percentage gains in house prices over the next two years.

Latest quarterly figures from CoreLogic, when annualised, imply the national property market is growing at 11.2 per cent a year.

However, there are some big differences between the latest price upswing and previous booms in Australian bricks and mortar.

A glaring distinction is the market is overwhelmingly being driven by owner-occupier homebuyers, rather than investors, who turbo-charged the property surge of the past decade.

CoreLogic’s Tim Lawless says at the peak in 2015, property investors made up about 46 per cent of all new mortgage lending. Today, investors account for just 23 per cent.

Lawless says possible reasons could be banks’ tighter credit polices around interest-only lending, and softer conditions in the apartment market that many investors favour.

“Weaker rental demand, especially in the investment enclaves of Melbourne and Sydney’s inner-city unit markets, is likely a significant disincentive for investors,” Lawless says.

Peter King, chief executive of Westpac, has also described the investor market as “relatively quiet.”

“I wouldn’t say we’ve seen [investors] come back into the market yet, but conditions are looking like that’s a possibility, I think,” King said.

Another unusual feature of the latest property boom is that it is occurring amidst the slowest population growth since the First World War – something that you might expect to detract from housing demand.

Owner-occupier mortgages hit record levels

 

property boom

Source: ABS

What’s more, Mortgage Choice chief executive Susan Mitchell points out that the uncertainty of COVID-19 is likely to continue to hang over the market for months, as emergency financial assistance from banks and the federal government is withdrawn.

The mortgage broker’s half-year result also underlined another peculiarity of these times: while new loan growth is strong, there are also many customers repaying outstanding debt at a cracking pace.

So, if the property market is not being fuelled by investors or population growth, and coronavirus uncertainty lingers, what is driving prices higher?

All the evidence points to an owner-occupier bonanza. Australian Bureau of Statistics figures show new loan approvals to owner-occupiers surged 39 per cent in the year to December, while loan approvals for first-home buyers leapt by 61 per cent, boosted by government grants.

The surge is also a response to rock-bottom mortgage interest rates; when combined with a low supply of homes for sale, the result is strong price growth.

There is also a self-fulfilling dynamic at play in which people tend to jump into the market when they see prices going up, thereby drawing in more buyers. The phenomenon, known as “fear of missing out,” or FOMO, could further exacerbate price growth.

Experts say the unusual conditions suggest there is a divergent ongoing outlook for property – as opposed to yet another long-running boom.

Lawless is tipping national house price gains of 7-10 per cent but expects Sydney and Melbourne prices would be tempered to a degree by limits of affordability and their greater exposure to overseas immigration.

“I don’t think the market is fragile or is going to go backwards, but it’s hard to see housing values rising as quickly into next year,” Lawless says.

AMP Capital chief economist Shane Oliver also expects growth of 5-10 per cent, but says inner-city Sydney and Melbourne price hikes would likely be more constrained.

If FOMO catches fire and the boom starts to accelerate, the Reserve Bank of Australia (RBA) has made it clear that regulators would likely step in dampen the market. But for now, this looks unlikely.

RBA governor Philip Lowe this month said his main concern was “risky” lending from banks, not changes in house prices, but so far there had been few signs of a deterioration in lending standards.

 

 

Article Source: www.brisbanetimes.com.au

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Opinion

Westpac Forecasts 20pc House Price Gains

Westpac Forecasts

Westpac Forecasts 20 per cent gains in the housing market over the next two years.

In a report released Monday, the banking institution’s chief economist Bill Evans said he was expecting dwelling prices to rise 10 per cent nationally in 2021, and said the pace would continue into 2022, off the back of strong economic growth.

“The upturn is being supported by record low interest rates; the confident expectation among borrowers that these rates will remain low for years to come; ample credit supply; and an improving economic backdrop, as the roll-out of vaccines promises to bring the pandemic to an end and drives a sustained lift in confidence,” Evans said.

“The bottom line is that Australia’s housing upturn now has strong momentum that looks to be lifting further and will remain well supported by monetary conditions and an improving economic backdrop.”

Dwelling approvals surged 22 per cent in the final quarter of 2020, and new lending for dwellings lifted by 16 per cent in the December quarter, which Evans says demonstrates a robust and confident housing market.

“Most tellingly, buyer demand has run well ahead of ‘on market’ supply, with sales outstripping new listings by 34 per cent over the last six months and ‘stock on market’ down to just 2.5 months of sales—[where] the long run average is 3.8,” he said.

“A lift in new listings will no doubt be forthcoming but for now this is clearly a seller’s market.”

House prices forecast: Westpac

Westpac Forecasts

^ (as % change). Source: Westpac bulletin

Unsurprisingly it was the smaller capital cities and regional towns that were most likely to capitalise on these forecast dwelling price increases.

There was still concerns about lingering areas of weakness, specifically the Sydney and Melbourne high rise markets, but according to the Westpac Housing Pulse report they look to be a minor drag on the broader market surge.

Evans said it was the regions that had been largely unaffected by virus disruptions and benefitted from related shifts in internal migration flows that would see the biggest boost in property prices.

Evans said they were also predicting good news for the labour market.

“Australia is expected to see growth well above trend this year and next. The unemployment rate is forecast to decline steadily to 6 per cent by end of 2021, and 5.3 per cent by end of 2022.

“We now expect the upswing to generate stronger, double-digit, price growth near term while our expectation, back in September last year, remains that a policy response can be expected later in 2022 which will settle markets into 2023.”

 

Article Source: theurbandeveloper.com

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