The Development Digest | 24 February 2024

We are pleased to provide you with another edition of The Development Digest.

Please contact me on 0402 085 702 / [email protected] if you would like to receive our more detailed weekly updates via email each Friday morning.

This update will cover:

• Thank You - JLL Apartment Market Event Overview?
• You’re Invited - APDA Doom & Gloom or Coming Boom?
• JLL Australian Apartment Market Research Overview Q4 2023
• Headlines of the Week
• Current JLL Development Site Opportunities

Thank you for Attending JLL’s Apartment Market Event Overview???

Last night, the JLL Development Site Services team in conjunction with Cera Stribley hosted 60 guests at our Apartment Market Update Event. Despite the immense heat, there was a wonderful attendance and it was great to connect with lots of clients, friends and colleagues.

It was a pleasure to host the event and dissect the market during the panel discussion with Dom Cerantonio (Cera Stribley), Stephen Bowtell (Jellis Craig Projects) and Milijana Bojic (NAB), diving deep into Victoria’s current residential market and where the opportunities exist in 2024 and the coming years.

A summary of the event's key insights are as follows:??

• In 2023, the most enquired apartment product types were 65sqm, 2-bed Apartments.
• Affordability is a key consideration in the current market, and developers must be mindful of product and price positioning when designing their projects.
• Buyers of owner-occupier apartment product are being more patient and diligent than ever, and in some cases are demanding dozens of changes and variations to ensure the product perfectly suits what they are after.
• NAB research indicated that in forthcoming years, 27% of Australians will be single person households with an increased appetite for 1-Bed Apartments and diversity of product.
• As the RBA continues to assess data with a particular focus on wages growth and unemployment rates, interest rates are likely to remain on hold until the latter part of 2024, unless there is some sort of unforeseen geopolitical event.??

You’re Invited - APDA Doom & Gloom or Coming Boom?

JLL are delighted to announce that Josh Rutman will be hosting at the upcoming APDA’s Event - Doom & Gloom or Coming Boom? Josh will be sitting down with Eddie Kutner for an intimate discussion and to uncover Eddie’s views on the current market.

Personally, I am very much looking forward to this discussion with one of Melbourne’s most iconic developers.

Accompanied by a range of experts, this event will serve as a comprehensive exploration of the current state and the future of the development industry in 2024, and aims to bring together industry leaders, experts, and enthusiasts to engage in insightful discussions, share perspectives, and strategize for the future.

A delightful two-course meal accompanied by alcoholic drinks are included in the ticket, so you can stay energised while you indulge in quality real estate knowledge.

To secure your seats, please use JLL’s discount code DGBJLLCLIENTS to save over $150 per ticket.

JLL Australian Apartment Market Research Overview Q4 2023

The JLL Research Team have just released their Q4 2023 National and State Apartment Market Overview and Reports.

Over the next few weeks, the Development Digest will explore key findings and themes from the research report to provide you with as much detail as possible.

We are pleased to provide below an overview and summary of the report below:

Economic and Regulatory

Higher interest rates have seen households quickly run down the stockpile??of savings built up during COVID-19. The savings rate has fallen to just 1.1% in Q3 2023, from a peak of 24% during COVID-19. The savings rate is now below that before the pandemic.

Population Growth by State (% p.a.)

The pandemic saw a strong boost to interstate migration to the smaller states, particularly QLD and WA. However, NSW and Victoria have now caught up and the surge in net overseas migration to record levels has boosted growth in all states.

Employment Growth and Unemployment

Australian employment has slowed, but still grew a strong 2.8% (381,000??people) over the year to 2023 and unemployment remained a low 3.9% in Dec. Nevertheless, there are other signs the labour market is now softening, particularly a large fall in hours worked since around mid-2023.

Headlines of the Week

The AFR – Auction clearance rate hits 75pc

• Eager buyers are keeping pace with the expanding supply of homes listed for sale, snapping up around three-quarters of the 2044 homes auctioned at the weekend and last week – the highest volume to go under the hammer so far this year.
• The national clearance rate hit 75.4 per cent, down just slightly from the previous week’s result of 76.2 per cent – on a lower volume of 1642 listed auctions – which was revised down to 70.3 per cent on final numbers, according to CoreLogic’s preliminary numbers.
• At the 961 auctions listed in Melbourne, 72.2 per cent of properties sold.

The AFR – Some rents rise $56k a year, but demand still up

• Residential landlords in some inner-city and middle-ring suburbs pocketed as much as $56,000 extra in rental income in the past year as rents hit record highs across the big capital cities, data from SQM Research shows.
• Vacancy rates fell to 1.1 per cent nationwide last month, down from 1.3 per cent in December. Sydney and Melbourne dropped by 0.5 percentage point to 1.3 per cent and 1.1 per cent respectively, while Brisbane fell to 1 per cent from 1.1 per cent.
• Over the past 30 days to February 12, rents climbed by 2.4 per cent across Melbourne.

The AFR – Immaculate disinflation is unlikely

• A range of evidence suggests monetary policy in Australia has not been sufficiently tight to be confident that inflation will return to the centre of the Reserve Bank of Australia’s 2-3 per cent target. That’s a risk for inflation. And the outlook for interest rates.
• Inflation in Australia has slowed substantially from a peak of around 8 per cent at the end of 2022 to around 4 per cent at the end of 2023.

The AFR – Foreign buyers let off on extra stamp duties.

• At least 28 foreign-owned businesses had their additional stamp duty obligations waived last year, delivering an estimated $73 million hit to Victoria’s budget bottom line.
• ‘To encourage more homes to be built, foreign purchasers may be eligible for an exemption from additional duty when their investment or project supports housing growth across Victoria.

The AFR – RBA will cut rates within a year, says Westpac boss

• Westpac CEO Peter King predicts that the Reserve Bank of Australia will cut the cash rate ‘‘within the next year’’, in a nod to the economic slowdown and as inflation inches closer to target.
• The bank’s top forecaster, former RBA assistant governor Luci Ellis, has pencilled in a September start for monetary easing.

The AFR – ASX edges higher but property stocks dive

• The Australian sharemarket edged higher yesterday as a flurry of major moves from benchmark staples jostled the S&P/ASX 200 to and fro in one of this reporting season’s most active sessions.
• The S&P/ASX 200 closed up 6.8 points, or 0.1 per cent, to 7665.1 as gains in mining and financial sectors offset the biggest sell-off in real estate stocks in six weeks. The index is still down 0.4 per cent from its all-time high reached on February 2.
• A flurry of weaker-than-expected financial reports from the real estate sector sent property stocks down more than 2 per cent. Lendlease led the rout, plunging 14 per cent to $6.46 in its worst day in almost four years.?

The AFR – House prices could jump 5pc: McGrath

• Housing prices at the lower end of the market could jump by up to 5 per cent as more home buyers enter the market if interest rates fall as expected by many later this year, according to real estate agent John McGrath.
• On the seller side, confidence was returning faster from expectations of lower interest rates, which has led to an uptick in the volume of listings to start 2024.

The AFR – Wary RBA not ready to rule out another cash rate rise

• The Reserve Bank is unwilling to rule out another cash rate increase because it is not sufficiently confident inflation is on track to fall into its target range within the next couple of years.
• The RBA forecasts annual consumer price inflation, now 4.1 per cent, will fall to 2.8 per cent in December 2025.

The AFR – Inquiries up 20pc as rate expectations stabilise

• Home buyers are returning to the market as expectations grow that the cycle of interest rate increases has peaked, pushing up new sales inquiries by 20 per cent last month alone, Stockland chief executive Tarun Gupta said.
• But even as settlement volumes fell to 1614 from 1872, new residential sales rose to 2172 lots compared with 1804 lots a year earlier as consumers grew more confident about the outlook for interest rates, Mr Gupta said.

The AFR – BTR operator Local closes $650m fund for two buildings

• Local Residential has closed its first venture with an overseas pension fund, taking advantage of weaker conditions in the for-sale apartment sector to repurpose sites in inner-suburban Melbourne for two build-to-rent projects with a combined value of $650 million.
• Local, funded by Macquarie Asset Management Real Estate for its first project, a 477-unit BTR development in inner-northern Melbourne’s Kensington, had taken its first step as an external fund manager after securing the unidentified US institution to fully back the venture, co-founder Dan McLennan said.

The AFR – Lifestyle to raise $275m for ‘land lease’

• ASX-listed Lifestyle Communities has launched a $275 million raising that will support its growth into land lease residential estates, the latest vote of confidence for the emerging form of affordable housing.
• ASX-listed developer Stockland is pressing strongly into the sector, with plans to expand across 12,000 home sites in land lease estates. Last year Mirvac also made a big move into the sector as part of a $1 billion joint deal to acquire a stake in Western Australia’s largest operator.

We hope you have enjoyed another edition of The Development Digest. Please contact our team if there is anything we can assist you with.

Jesse