The Development Digest | 8.7.23 | JLL Development Site Services

We are pleased to provide you with 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:

• Observations of the Week
• Telstra Sells Significant Vacant Landholding
• Positive off-the-plan Sales Momentum - OSK’s $2.8bn Melbourne Square Project
• JLL Asia Pacific Debt Monitor – 30 June 2023
• JLL Debt Advisory – Indicative financing terms
• The AFR – RBA Statement 5th July
• Articles of Interest

Observations of the Week

• The conflict within the planning system and broader society continues. As other states such as NSW take seemingly positive steps forward to tackle housing affordability and the rental crisis, Victoria seems to be taking a few steps back before we go forward, with the Planning Minister imposing a ‘last-minute intervention’ and applying interim planning controls over a large area in Frankston that was earmarked for meaningful redevelopment (further details in article attached and summary below).

Clearly, there are various political forces at play. In one breath the Government is preaching affordability and easing cost of living pressures, and in the next, they are actively blocking reasonable development proposals in high density activity precincts.

• With this sort of Government intervention and interference, we simply do not stand any chance in addressing the housing requirements of our city and state over the coming years.
• Whilst it might not be perfect and will only benefit a segment of the market, there is plenty to take from the recent planning reforms in NSW (below sourced from PCA release):

1. Housing developments with a capital investment value over $75 million, which allocate a minimum of 15 per cent of the total gross floor area to affordable housing, will gain access to the State Significant Development (SSD) planning approval pathway.
2. These developments will also gain access to a 30 per cent floor space ratio boost, and a height bonus of 30 per cent above local environment plans.

Telstra Sells Significant Vacant Landholding

The JLL team have recently finalised the sale of a 2.3ha vacant landholding at 762-766 Blackburn Road, Clayton on behalf of Telstra.

Significant interest was generated in the opportunity from a number of high profile groups, despite the somewhat restrictive Special Use Zoning.

Positive off-the-plan Sales Momentum - OSK’s $2.8bn Melbourne Square Project

One of Melbourne’s most significant mixed-use projects – ‘Melbourne Square’, by major developer OSK Property, has sold more than half of the next residential tower within the project since launching sales in April.

It has been reported that 46% of the 170 sales (worth a combined $132.5m) were sold to owner occupiers, with the most popular product being 2-Bed / 2-Bath apartments, priced between $730,000 to $900,000.

According to the article, this demand is being driven by the record low approvals and construction of new dwellings. The Australian Bureau of Statistics figures released this week revealed just 137 apartments were approved for construction state wide in February, with the last time last time figures dropping below that level being January 2007, when just 37 apartments were given the green light.

The AFR – RBA Statement 5th July

JLL Asia Pacific Debt Monitor – 30 June 2023

This week, we turn focus to Australia and the RBA. Following resilient household consumption and sticky inflation, the RBA were forced to implement aggressive policy hikes to curtail domestic inflation. Twelve rate hikes in thirteen meetings have led to policy rate levels not seen since 2011, with messaging from the RBA clearly centered on its desire to return inflation to its targeted bandwidth (2 – 3%).

As indicated below, futures markets have priced in two further rate hikes before the end of the calendar year.

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

JLL Debt Advisory – Indicative financing terms

Headlines of the Week

The Age - Minister topples 'great wall of Frankston'

• At least two major high-rise developments along Frankston’s foreshore have been thrown into doubt after a surprise last-minute intervention by the state’s planning minister, a move celebrated by community activists and condemned by one property developer.
• According to a planning amendment gazetted by the Victorian government yesterday, Planning Minister Sonya Kilkenny has applied an interim design and development overlay to the area.

The AFR –??Sydney house prices rise 1.7pc on low stocks

• Auction clearance rates also lost momentum over the weekend, falling by 7.5 percentage points to 71.2 per cent, sparked by a rise in the portion of properties passed in at auction and withdrawn from the market. Nationwide, the clearance rate fell by 3.5 percentage points to 70.3 per cent, which was the lowest in nine weeks, while Melbourne fell slightly to 70.1 per cent.

The AFR –??Home lending, building approvals bounce in May

• Home lending and building approval figures jumped in May, posting gains of 4.8 per cent and 20.6 per cent respectively and matching the impetus displayed in recent house price growth.

The AFR –??Monash snaps up Telstra, CSIRO sites

• Melbourne’s Monash University looks set to boost its healthcare and life sciences credentials after acquiring two large sites opposite its Clayton and Parkville campuses from Telstra and the CSIRO.

The Australian – Renters now better off than homeowners

• Renters are better off than homeowners for the first time in a decade, new research shows, as successive Reserve Bank rate hikes send mortgage payments soaring. Analysis by investment group Jarden found rising rents were being dwarfed by the impact of successive interest rate rises on housing affordability, with home loan repayments doubling from 24 per cent to 44 per cent as a portion of net income.

The AFR – Units outpace houses as city rental prices surge

• Asking rents for units and houses accelerated to record highs in the nation’s biggest capital cities in the June quarter, fuelled by a lack of supply to satisfy strong demand, new data from Domain shows.

The AFR – Supply crisis now the biggest worry

• Concern over the need for governments to tackle the national housing supply and affordability issues have surged to a record high in the property sector, according to the latest ANZ/ Property Council Survey.

The AGE – Renters’ stark choice – pay up, or move out

• Melbourne unit rents have soared by $90 a week over the past year, reaching a record high and pushing tenants away from their communities at the same time as other living costs continue to rise.

The Australian – Real Commercial Magazine – Lendlease to focus on ‘affordable’

• Listed developer Lendlease will put affordable housing at the heart of more of its mixed-use precincts across Australia and says the pipeline of opportunities is growing. Hot on the heels of winning the $1.7bn job to overhaul the famed Queen Victoria Market in Melbourne, in which affordable housing will play a key role, the company believes more sites could be opened up.

We hope you have enjoyed another edition of The Development Digest.

Jesse