Throughout the residential subdivision market, we’re seeing high demand for land from developers, both in the current market and forward looking to secure a pipeline of future development. Sites with development approvals are in high demand as they remove planning risk and provide security for delivery timeframes. While consumer confidence has been wavering in the past 12 months softening sales rates, there is still firm activity across most price points. However, given the interest rate rises impacting loan serviceability, developers are positioning toward delivering product at more affordable levels, often leading to compression on block size. Delivery costs have seen significant increases, averaging 37 per cent across south east Queensland over the past 12 months, with the strongest impact being felt in earthworks, materials and skilled labour shortages. There doesn’t appear to be any relief in sight, particularly when considering the infrastructure projects planned across health, education and the Olympics in the next decade.
The future state of the market hinges on the result of the Queensland Government’s South East Queensland Regional Plan due in the coming months. However, in the medium-term, the forward view is that the land market will remain very strong, driven by undersupply with any future land delivery solutions likely to be too far on the horizon, where infrastructure crucial to future land release is often lagged by several years for new land included in the footprint this year.
Demand for townhouses and apartments is on the rise, while owner occupiers seek more affordable options to house and land, and investors are spurred on by the rental crisis driving returns and tenant security. However, both these markets face challenges when it comes to delivery of new projects, as supply chain issues, build costs, and builder availability continue to hinder development. Forward supply for these projects is not likely to meet demand, and is only viable for projects that can
achieve a revenue premium to cater for construction costs.
As much of the country faces a housing crisis, build-to-rent (BTR) projects are in the spotlight. BTR has been the subject of much discussion as a long-term housing solution. State and Federal Government incentives have been a welcome introduction to drive this much needed sector. As the market and product quickly mature, Queensland is well-placed for BTR projects - from a very limited supply previously, to some of Brisbane’s most exciting projects and a wave of new groups with a focus on south east Queensland. Brisbane is now drawing attention from international BTR platforms and institutional investors looking to capitalise on the housing undersupply, strong uplift in rental values and reduction in the MIT withholding tax rate from 30 per cent to 15 per cent.
