The Development Digest | 30.9.23 | JLL Development Site Services

We are pleased to bring you our weekly?JLL Development Site Services Market Update -?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:

• Coverage of Major Site Transaction
• Further Detail from the Urbis Summary – Victoria’s Housing Statement
• JLL Asia Pacific Debt Monitor – 22 September 2023
• Headlines of the Week

AFR Coverage of Major Site Transaction

Following a lengthy negotiation period, the JLL team are delighted to provide the below article published in this week's Australian Financial Review, detailing a major site acquisition in Melbourne by Gurner.

Victoria’s Housing Statement – Urbis Summary

Last week the Victorian Government released their much anticipated Housing Statement.

Below provides a further brief summary of the statement and what is coming, and if you would like to receive a full copy of Urbis’ summary, please contact the JLL team.

INCREASED HOUSING CHOICE IN ACTIVITY CENTRES

• DTP and the Victorian Planning Authority will play a role in preparing planning controls to facilitate housing development and associated community facilities, as well as incentivising the delivery of affordable housing, in and around 10 activity centres.
• The activity centres are – Broadmeadows, Camberwell Junction, Epping, Frankston, Moorabbin, Niddrie (Keilor Road), North Essendon, Preston (High Street) and Ringwood.

UNLOCK SURPLUS GOVERNMENT LAND

• Surplus government land across 45 sites to be rezoned to deliver around 9,000 new dwellings. The expectation is that these sites will deliver a diversity of housing types and a target of 10% affordable homes.
• Activation of the Arden Precinct is set to be prioritised. An EOI is expected in early 2024.

PRIORTY PLANNING PROJECTS FOR GROWING SUBURBS

• 21 priority projects will continue to be developed, delivering more than 60,000 homes and jobs in all parts of Victoria.
• Precinct Structure Plans for future housing in Melbourne and regional Victoria will continue to be prepared by the Victorian Planning Authority in support of continued housing growth.
• 425,600 new homes are targeted to be built for regional Victoria by 2051. With a new $1 billion Regional Housing Fund to deliver more than 1,300 new homes across regional Victoria. These are areas where future housing opportunities exist.

SOCIAL HOUSING

• Redevelopment of 44 ageing high-rise public housing estates by 2051 in Melbourne. Increasing capacity from 10,000 residents to 30,000 across sites in Flemington, North Melbourne, and Carlton. Social housing in the sites will be boosted by 10%.
• 425,600 new homes are targeted to be built for regional Victoria by 2051. With a new $1 billion Regional Housing Fund to deliver more than 1,300 new homes across regional Victoria. These are areas where future housing opportunities exist.

JLL Asia Pacific Debt Monitor – 22 September 2023?

Last week, the hawkish Fed surprised the market, taking global yields to new highs in the current rate hike cycle. For example, the 10-year US Treasury climbed to 4.5% last Thursday, hitting a 16-year peak.

The FOMC has kept its policy rate unchanged at 5.5% as predicted, but investors were quickly taken aback by a notable shift in the Fed’s economic projections. According to the newly released summary of economic projections (SEP), the Fed has now only penciled in 2 cuts in 2024 instead of the 4 cuts planned in their June SEP. This likely means the first cut is postponed to the second half of 2024. In fact, the US 2-year Treasury yield, the short-term rate more sensitive to the Fed's policy, responded to this adjusted rate trajectory, reaching 5.18% last Wednesday.

Fed’s September summary of economic projection?

Our weekly Debt Monitor update is provided by Sungmin Park (Director, Asia Pacific Capital Markets Research).

The AFR - Inner-city house smashes reserve as buyers keep up

• Auction clearance rates lifted to 74.4 per cent across Sydney at the weekend – the highest preliminary results since August – in a sign buyers are keeping up with an increase in homes being listed for sale.
• The latest data from CoreLogic also shows a stronger auction result in Melbourne, where the preliminary clearance rate was 70.5 per cent, up from 69.6 per cent the previous week.
• Nationwide, early results show a 72 per cent success rate, which is the highest in four weeks.
• "It’s possible we’re starting to see some signs that buyers are becoming a little bit more buoyed by this growing acceptance that interest rates have probably peaked and are likely to come down next year".

The AFR - Small developers hampered by finance, planners

• With the country chasing an ambitious national target of 1.2 million new homes over the next five years, developers turning over an average three new homes a year say they could play a much bigger role in boosting supply, especially in urban infill areas.
• ‘‘We could easily create 50 per cent of the stock that’s needed, given the amount of housing stock that our community is already creating,’’ he said.
• A poll by CrowdProperty Australia, a lender to small-scale developers, found that getting project finance was the biggest hurdle, preventing 56 per cent of from building more homes.
• Raising equity was the second hurdle, affecting 37 per cent of developers, followed by the price of properties at 34 per cent.
• ‘‘To support smaller-scale developers, CBA allows higher loan-to-value and loan-to-cost ratios for residential built-to-rent projects where loan funding requirements are at the smaller end of the scale,’’ she said.
• NAB said it supported developers investing in the ‘‘right’’ housing projects.

The AFR - Melbourne house prices set to rise up to 12pc in 2025

• Melbourne’s housing market is poised to outperform Sydney over the next two years, with prices accelerating by 12 per cent in the year to June 2025, sparked by higher demand and more constrained supply, KPMG predicts.
• Sydney house price growth is also expected to gain momentum, albeit at a slower 10.3 per cent after inflation is factored in, during the same period.
• KPMG chief economist Brendan Rynne said increased demand and markedly lower supply would fuel those healthy gains by the end of 2025 financial year.
• ‘‘Demand is likely to increase due to heavier migration, anticipated rate cuts moving into 2025 financial year and potentially relaxed lending conditions,’’ Dr Rynne said.
• ‘‘High rental costs could also push renters to buy instead, along with the longer post-pandemic demand for more space as people continue to work from home.’’
• Demand by foreign investors is also starting to pick up again and tipped to keep rising.

The AFR - Lloyd-Hurwitz: BTR vital to address housing crisis

• Susan Lloyd-Hurwitz, the property industry leader who now heads the new national housing supply council, has called for government action on planning and land availability to support the creation of institutionally owned, build-to-rent homes to help address the housing crisis.
• ‘‘It’s hard work, but it’s essential work to move beyond a place where there are half a million households in rental stress,’’ Ms Lloyd-Hurwitz told The Australian Financial Review.
• Topping the list of its 11 recommendations is a call for nationally consistent planning rules that would allow large-scale build-to-rent projects to be treated separately and given ‘‘expedited planning and development assessment’’.

The AFR – Gurner bolsters apartments pipeline with ex-office block

• Rich Lister Tim Gurner has bolstered his pipeline of build-to-sell apartments after acquiring a huge site on St Kilda Road on the Melbourne city fringe that he will convert into an $800 million luxury project with up to 180 residences.
• The near half hectare site at 424-426 St Kilda Road, which Mr Gurner has bought for about $80 million, is the second seed asset for his build-to-sell fund, which is backed by a $400 million commitment from Singaporean sovereign wealth fund GIC.
• His vision for the site, which has three frontages and views over the Royal Botanic Gardens and Albert Park, are for a luxury apartment project similar to what he delivered at Saint Moritz, a high-end development at nearby St Kilda.
• Mars Development sold the site to Mr Gurner in a deal brokered by JLL’s Josh Rutman and MingXuan Li, alongside CBRE’s Kiran Pillai and Tom Ryan. The vendors were advised by Lewis Tong of Advise Transact.

The AFR – Triguboff swoops on $50m site

• Apartment king Harry Triguboff has snapped up a $50 million Castle Hill development site with approvals in place for almost 300 units as receivership and mortgagee-in-possession sales flood the western Sydney market following local developer collapses and as rising costs and interest rates make many projects unfeasible.

The AFR – Hotels group plans big move into build-to-rent

• Fund manager and accommodation developer Pro-invest Group is planning a big move into build-to-rent apartments as it looks to further diversify its business, which owns and manages one of the largest hotel portfolios in the country.
• Founding partner and CEO Ron Barrott added that his team had taken the opportunity to look at the BTR space and see where it links in with its existing platform.
• A new report by JLL found that 8914 BTR apartments were under construction nationally – a 65 per cent increase, year to date. Alongside this, nearly 7000 more apartments have been approved, while the total number of apartments proposed or in planning has jumped 78 per cent this year to 16,269, according to the report.

Current JLL Development Site Opportunities

With an acute focus on high-quality offerings, we have a number of new sites coming to market shortly, both on and off-market, so please reach out to the JLL team to discuss any current requirement or mandate you have.

Should you wish to receive additional information, please contact any member of the JLL team for a confidential discussion.

We hope you have enjoyed another edition of The Development Digest and you and your family enjoy a wonderful and sunny Grand Final day, if you are reading from Australia. Please contact our team if there is anything we can assist you with.??

Jesse