The Development Digest | 9.6.23 | JLL Development Site Services

We are pleased to provide you with our weekly?JLL Development Site Services Market Update.

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.

Development Ready Podcast?

I recently sat down with Rob Langton from Ready Media Group to discuss the property development landscape with a key focus on the impact of the Build to Rent (BTR) sector.

Key themes that were explored:

• Recalibration of the market
• The housing shortage and population growth
• The impact of BTR on the development landscape
• Planning challenges
• What the future holds

Click on the below link to listen to the podcast:

Please contact our national Development Site Services team at JLL if you would like to arrange a chat to discuss our latest research into the sector, or for any of your development requirements.

The AFR - RBA Statement Summary

During the week, the Reserve Bank of Australia Board elect to increase the cash rate by a further 25 basis points to 4.10 per cent. See below statement by Philip Lowe from the AFR.

We expect that ongoing inflation and wage growth will continue to place upward pressure on rents and continue to push buyers into more affordable apartment product, creating opportunities in the development sector.?

JLL Asia Pacific Debt Monitor – 2 June 2023

Last week, global bond yields reversed course, declining across the board – the US 10 year lowered by around 11bps. Yet, global yields remain elevated, the highest levels since early March. Until last Thursday, yield compression trend continued amid weaker economic readings and the debt ceiling breakthrough. The market took a further comfort in dovish comments delivered by other FOMC member such as the Philadelphia Fed President, Patrick Harker following those encouraging comments made by Powell, Williams, and Jefferson, the three highest ranking officials last week. The US debt ceiling uncertainty finally came to end with the US Senate and House passing the agreed debt resolution. Plus, the US ISM manufacturing index fell to 46.9 in May, staying in contraction territory for seven months in a row.

However, the yields quickly shot up last Friday with the US labor market demonstrating its resiliency again. Much higher than expected 339K jobs – the consensus was 190K only - were added to the US non farm pay rolls led by construction, healthcare and leisure sectors. Likewise, the March and April job gains were revised up to 217K and 294K. Being said, the latest future pricing levels still imply the Fed will skip a hike in the June FOMC meeting. Nevertheless, this reading is undeniably strong, continuing to demonstrate a very tight labour market in the US. With those macro surprises over the last two weeks, the US bond market has quickly reversed earlier expectations, pricing out at least two rate cuts embedded into bond prices – now the market suspects only one rate cut at best by Jan 2024.

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

Headlines From the Week

The AFR –??House price bounce risks hard landing

• House prices gathered steam last month, jumping by 1.2 per cent nationwide, the fastest monthly increase in 18 months. Sydney home values accelerated by 1.8 per cent, taking the 3-month growth to 4.5 per cent. So far, the perpetually low listings and increased demand have been able to suppress the damaging effect of the 11 interest rate increases since May last year.

The AFR –??Sydney auctions strongest in 19 months

• Early auction results also show 77.2 per cent were cleared across the combined capital cities, the third consecutive week of robust increases, reflecting the solid house price increases during May.

The AFR –??Build to rent sector tipped to hit $10b

• Build to rent development will become the biggest asset class in new property development by 2030, eclipsing offices, student accommodation and even logistics as institutional investors – drawn by easing investment rules – tap opportunities in the country’s chronic housing shortage.

The AFR –??Rates push developers to loan ‘breaches’

• Surging interest rates, which hit an 11-year high of 4.1 per cent yesterday , will put more developers at risk of breaching lending covenants and under pressure to deleverage, mortgage broker Stamford Capital warns as part of its annual survey of lending conditions in commercial real estate.

The Australian – Lenders target build-to-rent as new towers take off

• The emerging build-to-rent sector is being eyed by local and international lenders as the sector’s fundamentals strengthen and new players enter the market.

The AFR – The suburbs where buyers pay in cash

• Broadbeach, Toorak and Mosman lead the country for cash purchases of residential property in an east coast housing market where one-quarter of all transactions are bought loan-free, new PEXA data shows.

We hope you have enjoyed another edition of The Development Digest. Have a great weekend ahead.

Jesse