Unit owners chase boom time profits in second-chance deals

UNIT owners are chasing second-chance deals to recover millions of dollars lost after neighbours within their buildings blocked sales to developers during the boom.

Proposed changes to body corporate laws for financially unviable strata schemes have opened the floodgates for owners looking to cash out while prices are still near their peak.

Agents in high-density hotspots in Brisbane and on the Gold Coast are scrambling to put together deals for owners of ageing buildings who were forced to turn down offers of up to twice the market value of their property, because a single owner did not agree to sale or redevelopment.

The changes bring Qld in line with NSW by lowering the threshold for cancellation of a community title scheme from 100 to 75 per cent of owners.

But while the reforms are in draft stage, developers are already circling back to buy out a dwindling number of potential high-rise sites in inner-city Brisbane, as well as along the Gold Coast’s southern strip from Broadbeach to Bilinga.

Carl Charalambous , of C Property Group, said Brisbane unit owners typically reaped a premium of 15 to 20 per cent from the sale of their whole building, compared to an individual listing.

“The new rule is a game changer,” Mr Charalambous said.

“The first thing we have been doing is going back to all of those owners where a transaction couldn’t proceed because of one greedy owner, because with interest rates rising it is a good time now to get it squared away while values are holding up strong.

“A-grade development sites are hard to come by and we are confident there is still demand — it’s just a matter of getting those interested parties back to the negotiating table and doing that as soon as possible,” he said.

High-rise residential land values in Brisbane performed more strongly than any other capital city in the 12 months to December 2022, Knight Frank’s Australian Residential Developer Survey 2023 shows.

Brisbane high-rise sites notched up growth of 5.3 per cent, “partly driven by interstate developers finding value for money as state borders reopened”, the report found.

Prices for new high-rise homes in the River City were also up 4.2 per cent over the same period.

More broadly, latest PropTrack data shows Brisbane unit prices hit a peak in July 2022, but were now 8.6 per cent down on 12 months ago.

On the Gold Coast, gains remained significantly higher.

Unit prices in Broadbeach were up 8.2 per cent from last year, and in Palm Beach, 1.9 per cent.

GV Property Group principal Antonio Mercuri said his agency pulled the pin on four potential sites at Broadbeach, Burleigh, Palm Beach and Bilinga over the last 12 months.

“These were held back from a sale due to one owner not agreeing to a very attractive deal presented that was well over the retail price of their individual apartment,” Mr Mercuri said.

In one case, 34 of the 35 lots consented to the sale, while in another, 11 of 12 unit owners were in agreement.

Some of the owners had been offered more than $1.2m for their units, which individually were valued at about $600,000.

“Another instance was where the building needed major repairs. The deal which was accepted by 8 of the 9 owners was in excess of $1.5m, where the average value of the stand-alone apartments was $800,000,” Mr Mercuri said.

“Unfortunately the deal did not proceed because of one lot owner and everyone had to chip in to get the building fixed as it had been deemed unsafe and uninsurable.”

Mr Mercuri said unlocking under-utilised medium-density sites was a key solution to the state’s housing shortage.

Pezet Matheson managing director Jayde Pezet said demand from interstate developers for suitable development sites remained strong, despite mounting barriers to getting projects out of the ground, including soaring construction costs and labour shortages.

“There is a considerable amount of sites that are currently on market and coming to market,” Mr Pezet said.

“We’ve had projects that we’ve been on that haven’t had the capacity to be feasible and some of those sites have gone back to market, while we’re still seeing an incredible rate of sale on projects that are under construction.”

Industry bodies including the Property Council had lobbied for reform for several years, with the issue brought to the fore at the Palaszczuk Government’s Qld Housing Summit in October.

Thanks to Viva Hyde at The Courier-Mail for the discussion.