A survey conducted by Knight Frank of 160 global developers from across 22 nations, including Australia, has concluded that the near-term supply and long-term design of housing is set to impacted by the current health crisis.
The survey found almost six in 10 global developers have delayed projects in response to the spread of the virus and that of those with delays, more than four in 10 are now making changes to designs that were once considered complete.
Developers are now showing a tendency to provide homes that can better accommodate working from home. Some COVID-19 inspired changes include space for home offices, healthier and greener living, urban appeal, mixed-use schemes, closer to home and virtual viewings.
While adjusting designs and sales processes have been flexibly managed, it appears that funding remains the biggest barrier. In Sydney, completion of high-density schemes this year is forecast to be almost 60 percent lower than delivery in 2019, which itself was six percent below the 2018 level. Knight Frank have highlighted however that branded residences, such as Crown Residences at One Barangaroo, have seen a surge in popularity over the last 20 years and the pandemic has highlighted some of the advantages of such developments.
Knight Frank’s Head of Residential Research Australia, Michelle Ciesielski has cautioned against any radical changes that look to solve the issue of social distancing as if it were an integral part of the world’s collective future.
“While it is still too early to confirm the lasting impact of the pandemic on the development landscape, it is clear that it has accelerated emerging trends and prompted new ideas for current and future developments.” Ms Ciesielski said.
“While developers will likely temper their urge to radically reshape development designs initially, what cuts through the findings of the research is the importance of not overreacting to the immediate fallout from the crisis.
“There is little evidence pointing to the need to design for future lockdowns or specified meterage for social distancing.”
With housing delivery a high priority in many markets, the research also examined some of the biggest constraints that developers are facing.
“According to our survey respondents, funding is the biggest barrier to global development, with just under a third citing it as their biggest concern, followed by market regulation via taxation, then the hurdles that come with planning,” Ms Ciesielski continued.
“Some global markets, including Sydney, have seen a reduced number of lending facilities offered to developers. At the moment there is decreased bank appetite for developer lending and in some markets the pre-sales requirements make it hard to begin construction.
“Supply constraints are likely to be exacerbated by the disruption faced during the pandemic. Across the seven key markets, on average, supply is forecast to grow by just one percent in 2020, though this will largely be driven by Hong Kong and Dubai, where the forecast increase in new homes being delivered is 53 percent and 40 percent respectively.”
Knight Frank National Head of Residential Shayne Harris noted that the Knight Frank Prime Global Cities Index, which tracks prime property prices in 45 cities, climbed just 0.9 percent during the year to Q2 2020, the lowest rate of growth since 2009. Prices declined two percent, on average, across the seven key markets although Sydney recorded three percent growth over this time.
“Some of these global markets had already experienced large corrections over the past five years – where the Sydney prime market saw the largest growth of 38 percent. In fact, Sydney coming from a lower price point, was also the standout performer over the past ten years with the prime luxury market growing by 73 percent,” Mr Harris said.
A reported ‘lifestyle revolution’ that is occurring across Australia is also said to be bringing some new residential opportunities in the top tier.
Knight Frank’s Erin van Tuil, Partner, Crown Residences at One Barangaroo noted that “Marketing Crown Residences at One Barangaroo, we have witnessed first-hand increased demand from buyers for this calibre of home, especially since the pandemic. Those looking to purchase inside Australia’s first fully-integrated hotel branded residences are drawn to aspects such as access to unrivalled serviced living and amenities, proximity to greenspace and the harbour, all while still being in the city. All of this demonstrates that branded residences could outperform rural and coastal locations.
“Sydney has emerged on the global stage for luxury home offerings and the wealthy are looking for that next level of luxury living. This is why the development of homes such as Crown Residences at One Barangaroo have come to fruition. The record sales achieved at the Residences are testament to this demand.”