For people in the Australian property development industry, Development Ready have identified some key emerging trends to keep an eye on for the year ahead…
Trend 1: Big bank funding more selective
With media reports and speculators expressing caution about the property market bubble bursting, the big banks will become more selective with their property development lending, through their increase on pre-sales and by reducing their loan-to-valuation ratios (LVRs).
However, this doesn’t mean that the big banks will shut up shop. Far from it. It’s just that the blue-chip lenders will favour the quality sponsors with a track record for quality projects.
The major banks will, therefore, scrutinise what type of development it is and its location so property developers should apply more due diligence to their finance acquisition proposals. This means ensuring realistic square metre rates, construction costs, GST inclusions, land value assessments, council contributions and more.
Essentially, if you have an attractive property development project and you’ve dotted the I’s and crossed the T’s, the big banks will remain receptive. Of course, the offshoot of this trend is that more property developers will seek finances from other alternatives such as mortgage trusts and second tier lenders.
Trend 2: Government will continue to invest in major infrastructure projects
Despite the hushed whispers about funds tightening, a number of large scale government-funded projects will keep property developers more than happy.
Take Queensland for example. The Commonwealth Games is just a year away and the Queensland government has a list of major projects, rumoured to be worth over $950m, such as the Commonwealth Games Village, a netball centre and two resort/casino developments in the works. This indicates that there is plenty of property development out there. It’s just the type of development that’s changing.
Trend 3: Positive signs in the 2018 property market
Overall, the property development market is looking strong for 2018, especially in the major cities, where investors are seeing some really promising results by using key metrics like population growth, unemployment rates and median house growth as a guide.
Melbourne, in particular, looks strong. Since 2013, Victoria has increased its population more than any other state. Its strong economy is fuelling job creation, with almost half the jobs in the country being created in Melbourne alone.
Perth is another city that indicates some promise after a period of relative stagnancy. There have been two trends that indicate this: the unemployment rate and the vacancy rate. Both of these are heading in the right direction.
Trend 4: New Technology will dominate how we do business
Technology is becoming more prolific in every stage of property development, from easy-to-use feasibility study apps to aiding communication between developers and investors, planning report information or general project management.
Previously focused to mostly residential real estate services, technology is now changing the commercial property industry as well, which, like any advancement, has its strengths and weaknesses.
One potential advantage is the shift towards more simple, intuitive software that will help property owners and companies manage their commercial real estate assets and make our lives easier in an industry with so many intricacies.
No matter if you support innovative property technology or you’re sceptical about its efficacy, real estate technology is on its way. Massive venture funds are already in play to accelerate real estate technology start-ups. Watch this space.
For more insights into the world of property development, check out Development Corner, our video series that interviews key players in the industry. Or search our latest property development listings here.