October 2024 Newsletter
HEY NEIGHBOUR!
We hope this message finds you well as we settle into the final stretch of the year. Melbourne is buzzing with excitement as the Spring Racing Carnival is about to kick off, with the iconic Caulfield Cup taking place this Saturday and the highly anticipated Melbourne Cup just around the corner. It’s a time when our city shines, and the festive atmosphere is contagious!
However, as we celebrate these local traditions, it's hard to ignore the challenging global landscape. Ongoing conflicts in various parts of the world continue to weigh heavily on our hearts. From the devastation in Ukraine to the strife in the Middle East and other troubled regions, we are reminded daily of the importance of peace, stability, and the impact these events have on communities around the globe. Our thoughts are with all those affected by these conflicts, and we remain hopeful for resolutions that will bring peace and security to these regions. The continued conflicts are madness, I keep repeating to myself and am astonished this is happening in this day and age.
Closer to home, Melbourne continues to face its own challenges. Housing affordability pressures, rising cost of living, and a tight labour market are testing the local property sector. Despite these hurdles, our city’s resilience is as strong as ever, with the property market adapting and new opportunities emerging.
Whether you're involved in real estate, development, or just keeping an eye on the local economy, there’s much to keep on the radar. We look forward to sharing insights, updates, and the latest industry news to help you stay informed and ahead of the curve.
Thank you for being part of our Neighbourhood Community, and here’s to a positive and exciting season ahead!
Be Safe, be Happy, be Healthy.
Carmela
MARKET INSIGHTS
We strive to stay up to date on the latest market trends. Here are a few articles we think are worth reading.
- Why build-to-rent is booming in Melbourne only (theage.com.au)
Key takeaways from the article- Build-to-Rent Growth in Melbourne: Melbourne leads Australia's build-to-rent sector, with 58% of projects underway, driven by population growth and availability of large-scale redevelopment sites, nearly doubling the number of apartments in the past year.
- Addressing Housing Supply and Affordability: The sector is seen as a solution to Australia’s housing crisis, with rising rents, low vacancy rates, and slowed traditional homebuilding. Government incentives, such as reduced taxes, are supporting its expansion.
- Investor Interest and Market Potential: Institutional investors, seeking stable returns, are increasingly turning to build-to-rent projects, achieving higher rental yields due to strong demand. Major transactions, like the Union Quarter sale in Melbourne, are expected to set benchmarks for the sector.
- Apartment slump spoiling efforts to boost housing supply (theage.com.au)
Key takeaways from the article- New Apartment Supply at Historic Lows: The number of new apartments being launched in Melbourne and Sydney is at its lowest in 15 years, with Melbourne seeing only 2100 new units in the first half of 2023. High construction costs, affordability issues, and slow pre-sales have stalled new developments, creating a serious impact on housing and rental affordability.
- Challenging Development Conditions: Rising land prices, financial feasibility issues, and a lack of construction resources (materials, labour) are hindering apartment projects. Mid-tier and affordable housing developers, in particular, are struggling to proceed, exacerbating the housing shortage. Top-tier developers are faring better but represent only a small part of the market.
- Impact of Housing Shortage and Migration: Strong migration, high interest rates, and inflation are driving rents higher, with limited new housing supply. Developers and financiers are hesitant to start new projects, and market momentum is unlikely to improve until interest rates are cut and economic conditions stabilise.
- Costs, labour shortages, and competition drive a decline in housing development (abc.net.au)
Key takeaways from the article- Falling Dwelling Approvals: Data from the ABS shows a 6.1% drop in new house and apartment approvals in August, with multi-unit developments down 16.5%. Construction costs have risen by over 30% in the past five years, and tight labour markets are making it difficult for developers to launch new projects, especially in the high-density sector.
- Challenges in Construction: The combination of high construction costs, competition with other sectors for labour, and material shortages has compressed developers' profit margins. Mid-level and affordable housing developers are particularly affected, delaying projects or making them financially unfeasible.
- Role of Social Housing and Government Support: Experts suggest that increasing social and affordable housing could alleviate some pressure on the market. Government intervention, such as providing essential infrastructure and de-risking sites, could help stabilise housing supply and support private builders facing cost challenges.
- Video on the current issues in the Owners Corporation Sector – Please watch and look out for who is managing your buildings (abc.net.au) (VIDEO - 44 Mins)
