november 2016 - storage.googleapis.com · entries coloured purple indicate positional change from...

November 2016Month in Review

Feature – Small projects, big dreams 3

Commercial - Retail 5

Residential 19

Rural 52

Market Indicators 59

Contents

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The vast majority of multi-property residential landlords love the idea of taking their investing up a notch. It’s a chance to say, “I got this real estate thing sussed. It’s all too easy. Let’s try a hand at something with a bit more excitement in a realm where the grown-ups play.” And that next move is often a small development.

But let’s not overshoot, OK?

Size doesn’t always matter when it comes to creating a significant return via residential projects, especially if your experience doesn’t extend beyond helping put a coat of paint on the garage door in order to bump up the rent. Many of the big time operators who are now building the mega-towers dominating our cityscapes started their developer journey with more humble structures and deals. Simple ventures that didn’t require them to “let it ride on 32 red!” Projects that won’t send you to the poor house or play Russian roulette with your kids college fund.

These sorts of deals are accessible to all. Those first tentative steps into a world that can help supplement your income, or even allow you to quit the nine-to-five weekday workload.

Breaking into the world of the property tycoon is actually a reasonably short step for most of us, but the key to success is understanding exactly what lies before you.

In this space, there’s almost no such thing as being ‘over informed’. You’re like some sort of small development Evel Knievel because you’re about to stare risk straight in the eye as it stands between you and profit and say “Lookout! I’m about to create something.” Even the greatest stuntman of the 1970s knows it pays to get right across the SWOT analysis where risk and reward are the primary components.

Our team at Herron Todd White are adept at spotting opportunities and threats – that’s what we do on a daily (in some cases, hourly) basis. Valuers look at the options and can conclude fairly quickly as to whether an investment is a “go” or a “no”.

With the sort of on-the-ground, across-the-land expertise we have at our disposal, it would be a shame not to let you in on a few secrets about the nation’s small development field. Our team is full of experts who can nuance their views down to suburb, or even street, level. We have the lasses and lads that are able to identify the best options for anyone

looking to break into the realm of small projects. Our professionals have not only picked the most popular options for small ventures on an office-by-office basis, they’ve also gathered intelligence on the most successful type of deals to tackle in their service area, as well as how these markets are performing. You get our thoughts on whether its worth buying into this sector now, or best to keep your powder dry and hope patience pays a greater profit.

For commercial this month, we’re having a gander at the retail sector. The commercial team have not only provided a handy market round-up, but this cracking information is peppered with some of the standout retail property sales in your area of interest for the year to date.

So there it is, your keys to cracking into the small development field plus help in setting up a retail portfolio – what more could you want? Of course, you shouldn’t take even the tiniest step without bringing on board the most formidable minds Australian property has to offer –¬ and you’ll find them right here at Herron Todd White. Simply drop us an email or pick up the phone and you can be on your way to the sort of expertise that’ll have you turning dirt on your first deal in no time at all.

Small projects, big dreams

It seems like a piece of cake, doesn’t it? Buy your first property, make some equity, buy another – rinse and repeat until you’ve got an enviable portfolio position that provides you with enough available funds to go to the next level.

Month in ReviewNovember 2016

Feat

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Commercial

National Property ClockNovember 2016Retail

Entries coloured purple indicate positional change from last month.

Liability limited by by a scheme approved under Professional Standards Legislation. This scheme does not apply within Tasmania.

This report is not intended to be comprehensive or render advice and neither Herron Todd White nor any persons involved in the preparation of this report, accepts any form of liability for its contents.

Peak of Market

Approaching Peak of Market

Rising Market

Start of Recovery

Bottom of Market

Starting to decline

Declining Market

Approaching Bottom of Market

Alice SpringsDarwinEmerald

AdelaidePerthGladstoneRockhamptonSouth West WA

HobartBurnieDevonportLaunceston

MackayTownsvilleWide Bay

CanberraCairnsNSW Mid North CoastMilduraSunshine CoastTamworth

SydneyBallaratBendigoCoffs Harbour

LismoreSouth East NSWToowoomba

Brisbane MelbourneGold Coast Newcastle

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OverviewAs we head towards that part of the year where retail becomes the focus, it seems timely to take a look at how property in this sector has been tracking.

Confidence is always key and Christmas brings plenty of promise, but market performance will vary greatly depending on which particular corner of Australia your investment occupies.

To help illustrate the diversity of retail markets, we’ve also included a wrap of the most important sales which have occurred in the retail sector to date in 2016.

SydneyThe retail market in Sydney continues its upward trend with increased demand from investors, increases in rental rates and lower vacancy rates.

Over the past few years we have made particular mention of the issues within the South Sydney retail market and the high vacancy evident. This area has undergone a major transformation from old industrial precinct to medium and high density residential development. As a condition of the mixed use zoning, many of these developments include ground floor retail. Due to the fringe location of many of these sites and the significant supply, retail in this area has been plagued by problems. Long selling periods, declining values, high vacancy and softening of rents have affected these assets but there is some light on the horizon.

We recently became aware of a sale of a strata retail suite on the ground floor of a medium rise development in a fringe area of South Sydney that shows some recovery. The property has recently transacted at an analysed yield below 5%. This is at least 1% below what we have would typically expect and much more in line with the yield compression we have seen in the Sydney retail market generally. The sale also shows an increase of over 30% on the previous purchase price just two years ago. The sale shows over $10,000 per square metre. Typically we have seen rates range from $5,000 to $10,000 with only properties in locations that have good exposure and strong trade achieving a rate at the upper end of this range. Whilst only a small glimmer of hope, it could show the start of a recovery for retail in this area.

Generally rents look likely to remain stable for the remainder of this year and early 2017. Demand is steady with prime assets achieving higher levels than in previous years.

The outlook for retail in Sydney overall remains positive for the remainder of this year and into 2017. We certainly expect prime locations to continue to perform well and judging by this recent sale, possibly some recovery in the fringe retail assets.

WollongongAfter a prolonged period of static conditions the regional Illawarra retail property market has shown

clear signs of improvement over the past 12 to 24 months. Private investors and owner occupiers are active and local agents are reporting increased interest from tenants. Yields have compressed as demand has increased and there is increased appetite for higher valued assets. Any asset underpinned by a blue chip tenant is highly sought after with analysed yields for such assets generally ranging from 5% to 7% and potentially 1% to 2% lower for sites with good redevelopment potential.

This market continues to be heavily driven by the low cost of borrowing and strong conditions in the Sydney real estate market, noting the industry continues to be impacted by changing conditions given the effects of online retailing and consumer spending habits.

In the Wollongong CBD, the retail landscape continues to evolve with completion of GPT’s Wollongong Central expansion and two new large mixed-use projects being developed at the lower end of Crown Street. Crown Street Mall continues its slow recovery post completion of its refurbishment but is facing stiff competition from Wollongong Central shopping centre which has recently expanded and continues to reposition with the inclusion of fashion retailer H&M.

NewcastleThe inner city retail market is currently performing at a slow rate with only a small number of retail sales

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New South Wales

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throughout the CBD since January 2016. The slow movement is generally attributed to the CBD being a tightly held market in which existing property owners are content to wait for improvement in the market rather than sell off properties now that the market has picked up pace after a sustained period of limited growth. The imminent completion of the new university campus on Hunter Street creates more retail trade and activity which has the potential to generate more activity in the retail market in that pocket.

There have been very few sales in the Hunter Street Mall in the year to date. The sale of units 15 and 16 at 200 Hunter Street was a sale of two adjoining units configured to a single retail space. The sale showed a rate of $4,940 per square metre and a yield of 3.84%. We consider this yield to be well below the market and that a yield of 7.34% was more appropriate.

Another sale of note is of an off the plan retail strata unit at 75 Shortland Esplanade in the brand new Arena development overlooking Newcastle beach. The sale price of $856,000 reflects $5,065 per square metre. This sale is in line with other sites in the area with water views.

Overall the general feeling is that the retail market in the CBD is on the rise. There are positive moves, particularly in the CBD, which is making retail a more

attractive prospect for investors and those seeking value add prospects to older properties situated around new developments.

Lismore/Casino/KyogleThe market remains relatively stable with limited sales and modest demand level.

A major environmental issue is the aspect of flooding. While this may seem of significant negative consideration, floods are well known in the Lismore region. Virtually all of the Lismore, Casino and parts of Kyogle Central Business Districts ground level shops have historically experienced similar flooding and as such, the towns are well versed in pre-warning arrangements and storage of stock, equipment, goods and chattels.

However while accepted locally, investors from outside the area are significantly more cautious and as such markets outside known flood areas experience stronger enquiry and demand with traditionally lower yields.

The divide between national tenanted properties and locally tenanted properties remain pronounced:

Address Sale Date

Sale Price

PassingYield

$/m2

Lettable area

Bank TenantBarker St, Casino

05/15 $1.147m 7.11% $3,059

Bank TenantBarker St, Casino

08/15 $1.15m 6.46% $3,177

Bank TenantRiver St, Ballina

02/2015 $2.8m 7.14% $4,921

Local TenantsBarker St, Casino

02/16 $535k 10.86% $959

Local TenantsMagellan St, Lismore

11/15 $1.025m 9.9% $1,444

Local tenantsCarrington St, Lismore

06/15 $1.675m 12.11% $1,673

Local TenantsVictoria St, Grafton

08/16 $1.84m 10.5% $1,363

The owner-occupier market particularly below $500,000 continues to perform well with yields similar to or lower than those demonstrated by national tenants.

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Coffs HarbourThere has been limited activity within the commercial retail market as property within the CBD is tightly held and rarely offered. This is despite there being a prevailing high vacancy rate within the prime strip centre. Many retailers are finding it difficult to meet overheads. There is a trend for affordable retail rental space outside prime locations. There is steady demand for retail property emanating from investors against a shortage of supply in recent times.

The Gowings Central shopping centre development and the eastern end of the CBD have undergone recent upgrade transformations and the recent letting of ground and first floor space in the renovated former CBA bank building has increased the appeal and feel of this end of the retail precinct. Retail yields are generally in the 6% to 8% range depending on tenant, lease terms, location and property detail.

The Grafton commercial retail market displays higher investment yield rates. Yields are generally within the 7% to 9% range. The market remains steady with a slight uplift in the local economy.

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MelbourneThe Melbourne retail property sector continues to perform well overall as a result of factors such as ongoing confidence in the market, a general sense of stability and the continued low interest rate environment. Tenants continue to seek secure prime retail space within both established and evolving retail locations. Retail spending has maintained a subtle but steady growth trend over the past few months which appears to have improved overall confidence in the retail property market. Properties with a strong tenancy profile and a long weighted average lease expiry (WALE) continue to generate low yields within a relatively active market.

Prime locations within the central business district (CBD) continue to perform well as the CBD retail landscape continues to evolve. As the number of international brands entering the Australian market continues to rise, competition to secure prime retail tenancies has encouraged rental growth within the core Melbourne CBD market. The importance of prime location within the CBD is further underscored by an apparent slowdown in overall rental growth within secondary CBD locations. Freehold retail and commercial sites within the CBD are relatively rarely for sale and when offered, generate high demand from developers for construction of multi-level mixed use towers. The retail strata market is more

active and demonstrates that there is a good level of interest from local and international investors for CBD retail assets. An example is the recent sale of Shop 4, 1-9 Exhibition Street, Melbourne which comprises a ground level strata retail shop of approximately 48 square metres currently utilised as a café (trading as Bonnie Coffee Co) for a term of seven years commencing June 2015 with one further option term of five years. The property sold for $1.3 million reflecting a yield of 3.96% and a rate of $27,083 per square metre.

Strong results outside the CBD are relatively common as the underlying demand for cash flow security and redevelopment potential encourage tight yields within the competitive inner suburban market. Sales within traditionally well-regarded retail strip locations such as Glenferrie Road, Hawthorn appear to remain strong. The sale of 719 Glenferrie Road, Hawthorn is one sale which is particularly hard to ignore. The property comprises a land area of 254 square metres improved with a single level shop of approximately 90 square metres, leased to national tenant Flight Centre for a term of five years. Selling under the hammer at an on-site auction in June 2016 for $3.18 million, the sale reflects a low yield of 2.89% and a high building rate of $35,333 per square metre.

Discussions with leasing agents regarding the Chapel Street locality have revealed that the retail leasing

market has softened in recent years. The previous fashion based precinct near the intersection of Toorak Road has experienced lower levels of demand than in previous years due to numerous factors including retailers now preferring to be located within the Melbourne CBD and major shopping centres such as Chadstone. Some retail rents have declined substantially over the past two years and in some instances by up to 30%. There is now an increasing shift in demand away from fashion retailers to food based tenants as has been seen in other precincts along Chapel Street. With the ongoing increase in population due to numerous apartment projects being constructed in the area, it is considered that there will still be demand for retail space within this precinct for many different types of uses other than fashion on a longer term basis. The sale of 364 Chapel Street, South Yarra in June 2016 has identified the importance of location within a retail area coupled with a strong tenancy profile. The property comprises a two level building totalling 217 square metres which is leased to popular food retailer, Mr Burger, until 2022 with one further option term of five years. The sale price of $2.88 million reflected an initial yield of 3.86% and an overall building rate of $13,272 per square metre and has proven to be somewhat of a benchmark sale within this location.

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Further from the city, the overall retail market appears stable as small neighbourhood retail strips continue to compete with the ever expanding super regional shopping centres. The recent sale of 62 Railway Avenue, Ringwood East, demonstrated the level of demand for retail property with secure leases which are well located in small local shopping precincts. The property was sold under the hammer at an on-site auction on 10 August 2016 for $1.512 million which reflected an analysed market yield of 3.75% and a rate per square metre of $6,750. The site of 279 square metres is improved with a single level building providing approximately 224 square metres. The sale was subject to a lease back agreement to Maroondah Community Enterprises Pty Ltd trading as Bendigo Bank Ringwood East Community Bank Branch for a term of five years with two further options of terms of five years each.

The sale of Unit 5, Pentridge Boulevard, Coburg once again highlights purchaser demand for cash flow security. This circa 900 square metre, two level, strata titled occupancy is located within the Pentridge Prison redevelopment. The property is tenanted by Melbourne City Ballet on a relatively new ten year lease. The property is considered to be in a secondary location to the east of Sydney Road. Car parking limitations associated with the subject property may have dampened overall investor interest for the subject property. None the less, the vendor of this property should be happy with the sale resulting in a yield in the order of 8.35%.

Although the current environment appears to be strong and purchaser interest for retail property is relatively high, we are of the view that this is led by an optimistic buyer perception of the market direction and may not ultimately reflect what is actually happening in relation to tenant demand, affordability and achievable long term investment returns on property. There appears to be a discrepancy between capital values and rental income growth as capital values within popular precincts appear to be experiencing strong growth while rental income growth appears moderate in comparison. As such, the market within these precincts tends to be influenced to a large extent by economic volatility.

The Melbourne retail market has experienced a significant strengthening in purchaser demand over the past 12 to 24 months. We have witnessed several strong results in recent times and it is worth noting that there is a perception of a rising market at present. A downturn in the economy or a softening in local market conditions could lead to downward pressure on demand and price in the short to medium term.

BendigoOutside of the Bendigo CBD retail areas such as Kangaroo Flat, Eaglehawk and Epsom have generally remained static. Within the Bendigo CBD there has been significant activity in Hargreaves Mall over the past 12 to 18 months. More retail sales have occurred within the Mall recently than over the past ten to 15

years with a flurry of sales occurring in the past six months. The Mall currently hosts a range of local and national retailers including Myer, Commonwealth Bank, Cotton On, Hudsons Coffee, Factorie and Typo. Recent sales have achieved yields between 6% and 8% and $2,626 to $5,892 per square metre of lettable area. Retail spaces in the Mall range from 70 square metres to 800 plus square metres with smaller spaces most common and a highly limited number of large retail spaces. First floor space in the Mall is generally poorly accepted by the market and commonly left unutilised. An underlying contributing factor in this market condition is the age of the building and the subsequent expense in complying with fire and safety regulations.

The key retail space competitor of the Mall is the Bendigo Marketplace, a single level enclosed shopping centre owned by ISPT Super Property. The Marketplace opened in October 1995 and has placed significant pressure on the Hargreaves Mall area ever since with major retailers including Big W and Woolworths. Despite this competition, investor interest in retail space within the Mall remains strong with strong demand for space from local and national tenants. Summer trade is expected to increase with the resurgence of the local Moonlight Market held within the Mall which offers market stalls, food trucks, extended trading opportunities and draws large crowds, creating a community focused point of difference from the Marketplace.

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South Australia

Adelaide’s retail sector continues to experience an extended period of difficult and challenging conditions. Testing local economic conditions combined with rising cost of living expenses and unemployment (South Australia 6.8%, nationally 5.6%) are driving negative sentiment and many are choosing to eradicate debt and consolidate at the expense of retail spending and discretionary spending in particular.

Below we have identified some of the stand-out retail sales in Adelaide this year:

Address Sale Date Sale Price Land Area Lettable Area Passing Yield Analysed Market Yield $/m2 Lettable Area

1040 The Golden Way, Golden Grove 03/12/2016 $3.95m 2,844m2 781m2 7.54% 7.54% $5,058

This property is a 2000s built, single-storey retail building (in close proximity to a suburban shopping centre in Adelaide’s outer northern suburbs) which comprises three retail tenancies – Café Primo, Jetts Fitness and National Pharmacies. The property sold at public auction and with a WALE of 5.28 years, onlookers (mostly over-enthusiastic valuers) expected fireworks and a sale price below 7%. However of the six bidders, two parties slowly traded blows between $3.9 million and $3.95 million with most bidders dropping out under $3.85 million. Discussions with the selling agent post-auction revealed the tenant mix, especially the fitness centre, may have potentially discouraged some bidders from a $4 million price tag. The number of 24 hour gyms has increased rapidly over the past few years and some analysts question the strength of this class of tenant.


544-546 Port Road, Allenby Gardens 13/04/2016 $1.495m 1,672m2 211m2 6.15% 6.15% $7,085

This property was a 1990s built former KFC fast food restaurant on one of Adelaide’s most prominent north-western arterial roads. The property was hindered by the chicken encumbrance, forbidding any production, sale or distribution of chicken from the property for eternity… However, a cunning man bought the property in May 2004 for $810,000 and opened a drive-through bakery from the premises (chicken pies included!). The property was sold at public auction with a WALE of 4.9 years and only a handful of bidders at the auction. The selling agent noted that the result was above expectations and that the longevity of the bakery’s successful performance made it appealing to several parties.

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208, 208a, 208b Henley Beach Road, Torrensville

12/05/2016 $1.370m 1,056m2 318m2 3.53% 4.64% $4,308

You would be forgiven for looking at this sale and thinking “Wow, 4.64%? That’s tight for Adelaide’s suburban west”. It is indeed too tight as this set of three row-shops with a WALE of 0.58 years comprises the valuable Urban Corridor zoning and appears destined for a four-storey, hebel panel apartment building in nine months’ time.

This sale indicates two key characteristics of Adelaide’s retail market: 1) good quality retail investment sales are few and far between in Adelaide at the moment; and 2) The rise in popularity of the Urban Corridor zone with residential developers has seen sites previously utilised for a range of retail purposes be demolished and redeveloped. In turn, Adelaide is experiencing a rapid growth in medium-density residential projects at present (typically three to four level apartment buildings, five to six apartments per level). While absorption rates for these residential apartments continue to perform steadily, more and more vacant or partially vacant suburban retail shops will continue to be redeveloped. In major retail strips throughout Adelaide, redevelopment isn’t such a threat as incentive based lease agreements. All agents note now any new lease will typically include (at a minimum!) an incentive the equivalent to one month rent-free per year agreed to in the initial term (five month rent-free in a five year lease).

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BrisbaneSales activity in the retail world is starting to slow with stock generally being very tightly held. A common refrain is that sellers cannot easily replace their investments with equivalent yields in any other asset class.

Yields for neighbourhood centres have continued to tighten throughout the course of 2016 however there is now a perception that we are approaching the top, primarily due to the tightening market for funding which is now requiring greater levels of equity.

The overwhelming demand for well leased retail stock in the sub $5 million market has created a seller’s market with buyers often cascading from one sales campaign to the next. When they miss out on the first property the urgency to buy the next can be very strong.

Most activity remains in the convenience and neighbourhood sectors, but even there the quantum of transactions is slowing.

It is also now timely to pause and reflect on the quantum of capital growth that has occurred in these markets over the past three years. A good recent example is the sale of the Sandstone Point IGA anchored centre which recently sold for $10.395 million showing a yield of 7.04%. This property sold three years earlier for some $8.25 million and showed capital growth of 26% over that period. This

is reasonably reflective of the neighbourhood and convenience centre markets generally.

Sandstone Point Shopping Centre – 26% capital growth over three years

More broadly, yields for well leased neighbourhood centres in strong locations are now well entrenched in the low 6% yield range.

Service stations are also hot at the present time. The Caltex complex at Northlakes was recently contracted at a yield of 5.13%, showing a staggering 48% capital growth over a three year period since its previous purchase.

Caltex Northlakes – 48% capital growth over three years

Whilst demand is likely to remain strong, we consider that the market is nearing the peak with the likelihood of yields bottoming out over the next six to 12 months.

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Queensland

South East Queensland Property Overview BreakfastDo you have your tickets?Guest speaker Mr Peter SwitzerTuesday 29 November 2016

For further information, contact Teresa [email protected] or 07 3353 7544

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ToowoombaThe expansion and redevelopment of Grand Central Shopping Centre continues with Stage 1 now complete and the balance of the project expected to be completed in early 2017. Centre management has been aggressive in leasing the new specialty shops, concentrating mostly on national quality retailers.

The majority of recent leasing activity within the Toowoomba CBD has been to cafés, bars and restaurants. The majority of these operators are new to Toowoomba, resulting in a strong influx of new options for local diners.

Retail rents in general have remained relatively static although market leading rents are often achieved for new developments.

The historically low interest rates have resulted in strong demand from investors for retail properties, however the lack of supply of quality, fully leased properties has limited the number of investment sales and has resulted in a firming of net yields over the past two years.

Recent retail investment sales in Toowoomba include the following:

3/879 Ruthven Street, Kearneys Spring – Modern retail building with two tenancies leased to an Indian restaurant and a convenience store. WALE of 3.15 years. Sale reflected a passing net yield of 7.28% and analysed net yield of 8.25%. Sale price of $580,000.

283 Ruthven Street, Harlaxton - Semi-modern retail centre leased to Red Rooster and a Foodworks supermarket. WALE of 2.83 years. Sale reflected a net yield of 7.8%. Sale price of $1.575 million.

330 Stenner Street, Kearneys Spring – Restaurant leased to local Pizza Hut franchisee. WALE of 8.56 years. Sale reflected a net yield of 5.82%. Sale price of $1.85 million.

GladstoneThe retail market in Gladstone has continued at a similar pace to most of 2015 and the beginning of 2016, with increasing vacancies in secondary locations, and reductions in rental levels. Well anchored centres with good location, access and exposure appear to be maintaining occupancies, however centres in secondary locations or with no significant anchor tenant appear to be bearing the brunt of current market conditions. Sales activity has been low, with no known notable retail sales during 2016. The market is currently dominated by owner-occupiers who are taking advantage of the weaker market conditions and low interest rates. The development site on the corner of Boles and Breslin Streets generated a fair amount of talk and media when it was purchased by Aldi Foods Pty Ltd in January. Construction is now well underway and the completion date is speculated to be toward the end of 2016. The development of a multi-million dollar Coles anchored shopping centre, opposite

the existing Woolworths centre on Dixon Drive, continues to remain at the forefront of discussion as Coles continues to challenge the decisions made by Gladstone Regional Council. The latest reported update is that the fourth development approval to be submitted (subdividing the site into four lots) has been approved, yet with many conditions that Coles is reportedly set to challenge.

RockhamptonThe Rockhampton retail market has been largely subdued throughout the year, with owner-occupiers and investors alike remaining selective in their purchases. Owner-occupiers have remained active up to a price point of $1 million, with few sales above that price. Investors have shown a strong preference for properties with strong tenant profiles and long lease terms. Two significant recent investment sales are that of a freehold property leased to Red Rooster reportedly for $1.6 million with a reported passing yield of approximately 5.7% and another property tenanted by a local business with a near ten year lease term under contract for a sale price reflecting an analysed yield of 7.7%. Both of these sales reflect yields well below the average that typically falls in the range of 8.5% to 9.5%. There are a number of other tenanted investments with long lease terms that are starting to arrive on the market as owners look to take advantage of increased investor interest in the commercial space, particularly from non-local investors chasing comparatively higher

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yields than metro areas. The new Parkhurst Town Centre shopping complex is reported to be opening in November adding further retail space to the Rockhampton market. The centre has secured Woolworths as the anchor tenant with room available for over 30 specialty stores. Committed tenants are reported to include a standalone service station, medical centre, bottle shop, discounted goods store and pharmacy.

Mackay

The retail market in Mackay in 2016 has seen a continued oversupply of retail properties for lease and for sale. Positive signs in the market have been seen in the sub $1 million range (and particularly sub $500,000) with a number of owner-occupiers snapping up properties at lower prices than two or three years ago.

We have continued to see some investor activity. Properties with strong lease covenants are the product of choice for investors. Analysed market yields for genuine retail investment sales show a fairly consistent range of 9% to 10%.

Some stand out retail investment sales have been seen in the Mackay region this year, including the sale of the Gasworks Complex in April for $5.35 million with an analysed market yield of 10.25%. The Gasworks Complex comprises a modern retail complex with 14 tenancies and three vacancies at the time of sale.

Another retail investment is 52 Gordon Street which also sold in April for $800,000 with an analysed market yield of 9.67%. At the date of sale, the property comprised seven tenancies and one vacancy (which has now been leased) and was purchased by a New South Wales based investor.

A less recent stand out retail sale is that of Mount Pleasant Plaza which sold in October 2015 for $4.35 million and showed an analysed market yield of 9.7%. The property sold fully leased to a local investor.

Retail leases in the city heart are showing that properties sub 200 square metres on the ground floor are the highest transacting retail property type. There have been a limited number of recent retail leases and rent-free incentives are being offered to secure tenants.

Current leases show a range of $150 per square metre per annum gross for a small 80 square metre tenancy up to $250 per square metre per annum gross for a 114 square metre tenancy. There have been leases as high as $350 per square metre per annum gross, but these are few and far between. It is a tenant’s market in the retail space at present, with many options available and landlords having to be flexible on the rate per square metre and incentives to secure tenants.

TownsvilleOver the last quarter, Townsville’s retail market has seen a resurgence of local buyers (owner-occupiers

and investors) in the sub $1.5 million entry level retail investment sector.

The end of 2015 saw a flurry of larger retail sales driven by southern investors including Vincent Village for $16.7 million and Rising Sun Shopping Centre for $9.85 million. There were also a number of other retail properties in the $3 million to $5.5 million range.

The flow-on from this investment along with an increased level of market sentiment has seen the recent sale of several smaller strip commercial and suburban convenience centres. These properties, some of which have been on the market for an extended period of time, have vacancies and low WALEs. Local buyers including intending owner-occupiers and investors are potentially seeing the opportunity to realise upswing in this secondary retail product and that coupled with the affordability is making the potential for capital returns enticing.

This resurgence, possibly on the back of recent positive announcements including the Stadium and Waterfront precincts, is indicating a renewed level of confidence amongst local buyers in the market.

CairnsThe Cairns retail market passed through the bottom of the cycle during the course of 2014 but the limited recovery thus far means that the retail property market remains relatively flat. It must also be said that retail property sales in Cairns are sporadic, with

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most sales involving retail property being of mixed use retail and office buildings or tenant buyouts of single premises.

High exposure CBD retail space remains reasonably well occupied, but vacancies are more noticeable in the lesser exposure locations and CBD fringe. Rents have remained generally stable, showing ranges of $600 to $800 per square metre per annum for prime CBD space and $1,000 to $1,500 per square metre per annum in key tourist precincts such as the Cairns Esplanade.

Blue chip retail located within the main Esplanade tourist strip and CBD show reasonably low vacancies, though there is also limited demand from new businesses. There remains good investor demand for well leased properties which rarely come onto the market.

There have been no retail property sales of note thus far during 2016, however the Bellview Hotel, which represents a prime hotel and retail redevelopment site on the Cairns Esplanade with significant holding income, has been recently placed on the market and will be watched with interest.

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PerthWith weak consumer discretionary spending continuing, retail owners have been under pressure to maintain occupancy in their assets, with evidence of increasing incentives in this market. Vacancy rates have increased marginally throughout the year across the board, however remain lowest in regional shopping centres. There is however an increasing trend towards tenants on short term leases, holding over and pop-up style shops.

Over the next few years construction across the regional centre sector will increase as institutional owners seek to grow and reposition their assets. Planning is still underway for a circa $400 million expansion of the Garden City Shopping Centre in Booragoon with an additional 42,780 square metres of space due for completion in 2019. Karrinyup Shopping Centre is planned to almost double in size to 113,000 square metres with an expansion of 50,000 square metres at a $600 million cost. Likewise, Innaloo Shopping Centre is planning to double in size creating another 110 retail outlets in a planned $450 million expansion over two stages, one which will be completed in 2018 and the other in 2026. Lakeside Joondalup completed a 28,336 square metre expansion project in 2015. Midland Gate is extending another 19,395 square metres which is planned to be completed in 2017.

Meanwhile, in the sub-regional shopping centre space, Lakelands Shopping Centre is under development by ISPT. Located 65 kilometres south of Perth near Mandurah, upon completion it will be a convenience based neighbourhood centre. Due for completion in November 2016, the centre will be anchored by Aldi and Coles and complemented by First Choice Liquor and 37 specialty retailers. The centre will be 13,900 square metres of retail lettable area.

Sub-regional shopping centre owners are also focusing on actively managing their assets and maintaining occupancy levels. Leasing incentives are typically being offered which translate in the form of a contribution to fitout equivalent to six to twelve months rental on a typical five year lease.

Vicinity Centres is constructing a 24,000 square metre factory outlet centre at Perth airport.

The biggest demand for space in shopping centres will come from entertainment or food related retailers and in the CBD of Perth, international retailers will be most active.

South West WAThe retail property market in South West WA remains subdued with business cautious due to the broader economic uncertainty and global economic volatility. There is currently very little retail development

activity in any of the major towns. Rental demand is weak and rents are declining, leading to very low speculative activity.

There has been a limited number of retail sales transactions in the South West to be able to gauge a clear pattern of values however weak demand in this segment indicates rent and price softening. Most properties are tightly held which is helping to balance the market but extended selling periods are required.

A significant sale of note is the Grand Cinemas development in Bunbury. This is a landmark building situated in the centre of the Bunbury CBD. It comprises six cinemas and five specialty tenancy areas. There is also a public car park adjacent to the property. The property has a net lettable area of approximately 2,409 square metres and a land area of 3,725 square metres. The property sold for $13.3 million in March 2016.

Another significant sale of note in Bunbury is the former hospital site which has been purchased by the German global supermarket chain Aldi. This 10,373 square metre vacant site situated at the southern entrance to the Bunbury CBD is zoned for commercial, mixed use and high density residential. It has the potential to be developed to a height of eight stories and has excellent road frontage. The property was purchased for $5.87 million excluding GST in October 2015.

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Just south of Bunbury the recently completed Woolworths Shopping Centre in Dalyellup sold for $31.55 million in June 2016. This is a 2.28 hectare site with a gross lettable area of 6,504 square metres comprising a Woolworths supermarket and 13 specialty shops. The Woolworths supermarket has a 20 year lease. This is a well located centre by the expanding residential locality of Dalyellup.

Due to its population growth and broad economic diversity, the South West WA region stands poised to deliver strong economic growth in the long term which should underpin long term demand for commercial property in the area.

Residential

National Property ClockNovember 2016Houses

Entries coloured orange indicate positional change from last month.



Peak of Market


Rising Market

Start of Recovery

Bottom of Market

Starting to decline

Declining Market


Coffs HarbourNSW Central CoastNewcastle

Toowoomba

Perth DarwinAlice SpringsGladstoneMackayRockhampton

BundabergEmeraldSouth West WATownsville

BrisbaneHobartBurnieDevonportHervey Bay

LauncestonMilduraMount GambierWhitsundays

AdelaideMelbourne SydneyCanberraBallarat

BathurstCairnsOrangeTamworth

Gold CoastIpswichNSW Mid North Coast

NSW North CoastSouth East NSWSunshine Coast

Peak of Market


Rising Market

Start of Recovery

Bottom of Market

Starting to decline

Declining Market


National Property ClockNovember 2016Units

Entries coloured blue indicate positional change from last month.



MelbourneNSW Central CoastCoffs HarbourGold CoastNewcastle

BrisbaneBallaratToowoomba

Perth Darwin

Alice SpringsGladstoneMackayRockhampton

AdelaideCanberraBundabergEmeraldSouth West WATownsvilleWhitsunday

Hobart BurnieDevonportCairns

Hervey BayLauncestonMilduraMount Gambier

BathurstOrangeSunshine CoastTamworth

Sydney IpswichNSW North Coast NSW Mid North CoastSouth East NSW

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OverviewSmall residential projects provide an opportunity for mum-and-dad style investors to break into the next level of property speculation.

It’s important to be well informed as even the most seemingly minor of projects can be a financial undoing – particularly if you don’t get fully prepared before taking the leap.

This month, our offices give you a nuanced wrap about what’s on offer, where to find it and whether it’s worthwhile even looking for small projects. It’s an easy introduction to this nation’s first-time-venture sector.

SydneyThe strength of the Sydney property market, demand for housing and overall affordability have seen professional developers and mum-and-dad developers invest in the property market with small scale developments. It seems that investors are moving away from the once traditional investments such as government bonds and also shares which are seen as more volatile with higher risk for less return. This along with the increases in property values has proven that the property market has more appeal. A lack of available land in already established areas has seen a rise in popularity of redevelopment on both a large scale and on the small mum-and-dad scale as developers take advantage of infill rezoning,

transport infrastructure projects and overall demand for new products.

Northern SuburbsThe northern suburbs of Sydney is price restrictive for the mum-and-dad developer, creating a barrier to entry for developers who are not cashed up. The only way mum-and-dad developers can participate is if they already own the property. We note the recent sale of an approved two lot subdivision in the leafy north shore suburb of Lindfield. The property sold for $2.55 million in January 2015. The purchaser subsequently secured approval to subdivide the rear portion of the block. This same house with approved subdivision plans re-sold in July 2016 for $3.92 million. That’s a profit of $1.37 million over 18 months for obtaining approval only. This is reflective of the difficulty in obtaining approval in this area, the potential end value for a new dwelling if sold and how entry level mum-and-dad investors can be priced out of the market.

South WestSouth west parts of Sydney have seen an explosion in development. Areas such as Parramatta, Holroyd, Fairfield and Liverpool generally see dwellings on far larger allotments than inner city suburbs which makes way for development opportunities subject to council approval.

Typical small scale projects include:

• Dual occupancies (granny flats, two dwellings on one title, duplex pairs);

• Subdivision of an existing parcel where the owner keeps the main dwelling and sells off the vacant parcel.

When taking on such projects an understanding of the council’s local environmental plans and development control plans is a necessity to ensure any viability with proposed projects. Generally sites that meet minimum requirements of frontage, size and zoning will be highly sought after, as the approval process for any development can be far less strenuous and cost and time effective.

The issue for mum-and–dad developers is trying to compete with local small scale developers. They are generally at a disadvantage because they tend not to have:

• Start-up capital to fund projects, in particular the ability to compete for purchase of a site while still being able to make any profit;

• Experience in building and understanding of local council requirements;

• Straight through process of completing the task in the most cost effective way;


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• Lack of connection with builders. Mum-and-dad developers would generally have to pay cost plus labour rather than local developers who can source materials cheaper and cover labour themselves.

The projects that the mum-and-dad developer often tackle that can be very successful due to the reasonably cost effective start-up costs are where they consolidate their own site and remove the need to compete in purchasing expensive land. This is normally by way of granny flats, second dwellings and parcel subdivisions.

These small scale developments are well received by the buyer market. The reason for this is because they appeal to different sections of a very active market, such as:

• An investor looking to purchase a site with dual income;

• The extended family arrangements which are popular with residents of the south western area.

• Affordability for the buyer of a smaller home.

As a mum-and-dad developer the important concept is not to go beyond means and ability. Start off small and build from there.

East/Inner WestWithin the eastern suburbs and inner west regions there is generally limited small development projects undertaken by mum-and-dad developers. Even the smaller scale developments of approximately

three to six units are generally undertaken by more experienced developers mostly due to the price points and land acquisition costs.

The more common types of small projects tackled within these regions are duplex pairs, dual occupancy (granny flats) and renovation and shift.

There is a wide range of buy-in price points for a duplex site in the eastern suburbs depending on area. More prestige beachside areas of Bondi, Bronte, Clovelly and Dover Heights will set you back generally $2.75 million plus. Suburbs in the lower eastern suburbs such as Chifley, Malabar and Little Bay will set you back approximately $1.6 million plus for a duplex site with company title used to get approvals through council as opposed to the more conventional strata title or Torrens title.

We have seen these areas undertake more renovation projects of existing dwellings with the potential for capital gains. Renovated properties are receiving good premiums at present and experienced renovators are receiving good profits from renovating and selling.

Some examples of renovation and shift are 4 Broughton Street, Paddington which previously sold in September 2015 for $1.95 million. The property was a fully renovated 3-bedroom, 3-bathroom Victorian terrace with one car space and was recently re-sold in August 2016 for $2.9 million.

2 Walter Street, Leichhardt (pictured below) previously sold in July 2015 for $990,000 in poor condition. The property was fully renovated and extended and was re-sold in July 2016 for $1.75 million.

Source: RP Data

Source: RP Data


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Properties are also being purchased to hold for redevelopment potential in the longer term. Areas such as the Sydenham to Bankstown Urban Renewal Corridor (inner west) and areas close to the South East Light Rail (eastern suburbs) have been popular for their future potential.

SouthThe southern regions of Sydney have seen more opportunities for smaller developers with the most common types of small projects tackled being generally duplex pairs, dual occupancy (granny flats) and small scale townhouse or villa developments.

Popular development suburbs include Carringbah, Cronulla and Miranda. The strong demand for new product has seen an influx of owner builders and developers in recent years. Entry level duplex sites generally start from $1.3 million with duplex construction costs ranging from $750,000 to $1 million depending on size and quality and finished product generally ranging from $1.3 million to $1.9 million.

Some small townhouse developments have also been popular in these locations with a recent example being 69 Caringbah Road, Caringbah. This property was purchased in July 2015 for $1.805 million and gained development approval for three townhouses. These are currently on the market with asking prices in the vicinity of $1.5 million.

Granny flats have also become increasingly popular with a 2-bedroom granny flat being built for circa $120,000 to provide extra rental income.

These areas have also seen opportunities for renovation and shift. For example a property at 3/7 Whitewood Place, Caringbah South (pictured below) comprises a 3-bedroom, 2-bathroom single level villa which was previously sold in March 2016 for $855,000. Following renovation the property sold on 26 August 2016 for $1.3 million.

Source: RP Data

CanberraSmall projects for advanced property investors in the residential space revolve around development. Examples include new multi occupancy construction and extensions or renovations to existing dwellings. These developments require some expertise in town planning and construction to enable the best returns. The recent release of cleared Mr Fluffy blocks onto the market has provided opportunity in this area as planning and development rules are less restrictive.

Large centrally located blocks present the best land for multi occupancy development. RZ2 zoning permits redevelopment. Other land features in demand include street frontage, location and access to services and corner locations.

As Canberra continues to expand with land releases occurring in Gungahlin and the Molongolo Valley, the demand for centrally located larger residential blocks with potential continues. The market for this type of property is expected to remain strong over the short term. It should be noted however that planning rules require some administration and preparation work to allow development to occur. In some cases this has resulted in long term land owners being able to sell to experienced developers at a premium due to the development potential. As stated town planning and construction experience is important.


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IllawarraDue to the strength of the residential property market in the Illawarra, small infill developments are currently more feasible than ever, in fact quite lucrative for owners where development is possible. The most common small scale development is a dual occupancy, often with Torrens or strata subdivision.

We are noticing two types of dual occupancy. The first is typically an older established dwelling on a larger block around 700 to 1,200 square metres and with a frontage over 16 metres. R1 or R3 zoning makes council approval easier. The current house is kept as is and a new detached dwelling is constructed at the rear of the block. Usually a garage or other site improvements need to be demolished to allow for construction of the new dwelling. Illawarra suburbs where this is prevalent include those close to the main CBDs such as Fairy Meadow, Coniston, Bomaderry and Nowra.

The second type of dual occupancy is the construction of a new duplex pair. This can involve the knock down and re-build of an older dwelling in an established area or allowable construction in a new estate. These blocks of land (or older houses) with dual occupancy potential are often purchased by small scale developers, with both duplexes sold individually once construction and subdivision are completed. This type of dual occupancy is widespread in recent land subdivisions in Lake,

Heights, Berkeley, Flinders, West Nowra and South Nowra.

There is currently strong demand for new properties which is driving up prices of duplex properties, thereby increasing developers’ profit margins. A ten year old, semi-modern duplex recently sold in May 2016 for $564,000 after the vendor had purchased it in March 2015 for $462,000 - an 18% increase in just over one year. Where possible, developers are best to hold off selling their new constructions for as long as possible while prices continue to increase rather than selling them off the plan early on in the project.

Southern HighlandsWith strong prices in the residential market being achieved across the townships of Moss Vale, Bowral and Mittagong, it is not surprising that there is an increase in activity in the stand alone renovate, extend and sell market. Traditionally 1910 to 1920s cottages close to the town centres have been the subject of the first wave of this style of development. This has more recently extended to second ring areas that historically have been characterised by affordable, stand alone dwellings of circa 1950s to 1960s.

Under the current Wingecarribee LEP 2010, there have been infill development opportunities for villa development, which have now become economically viable with the increase in completed unit sales

prices. This is particularly the case in the townships of Bowral and Moss Vale.

We have also noticed the emerging popularity of dual occupancy developments across the hamlets of Hill Top and Bargo being located in reasonable proximity to the freeway.

Entry prices range from $500,000 to $1 million and experienced developers have been obtaining normal profit on costs of 10%, timing and quality being the key.

Southern TablelandsSimilar to the Southern Highlands, redevelopment opportunities of stand alone cottages within walking distance of town seem to be the most popular type of development for the small developer. Again key to success is experience in the market and control of costs via utilisation of local reliable contractors. Entry prices are between $450,000 and $600,000.

NewcastleResidential property owners are tapping into their growing equity to utilise investment opportunities. And why not, given that at any point in the year we are all drawn to watching renovation (reality) TV programs, creating that desire to take on a project from start to finish yourself.

Smaller scale development options can include a minor subdivision of a large residential block,


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allowing for a second dwelling, granny flat or even a knock down and re-build with townhouses. All are appetizing small scale projects for novice investors.

In our patch of Newcastle and The Hunter, mum-and-dad investors may have difficulty sourcing an investment opportunity for small scale development within a desired budget. Given the stronger property market within the confines of Newcastle itself, turning up to Saturday’s open homes and attempting to get through the front door can only be described as being more hectic than the mosh pit of a 1992 Metallica concert in Alabama. We also note that this is the same case across every price point within the region with recent sales of blue chip properties upwards of $3 million.

Higher competition between prospective purchasers ultimately reflects higher sale prices, which will influence the end profitability for the investor. Given this, investors are currently not evident in the Newcastle market, unless the typical mum-and-dad investor is looking to upsize and can secure a property with re-development potential in the long term.

Reaching out to Port Stephens, in particular Colette, Salamander Bay and Nelson Bay where there is low supply in any residential land availability, any block that has the potential to provide additional housing is in high demand.

In areas with continuous expansion of residential development such as Fletcher, West Wallsend, Gillieston Heights and Chisholm, mum-and-dad investors seeking to increase their portfolios are looking to grab the corner or wide frontage block that will allow for a duplex pair to be built.

NSW Mid North CoastThis month we are looking at small development projects within our area, focusing on the mum-and-dad developer.

On the Mid North Coast we have noticed a recent and significant increase in dual occupancy style developments. This style of development has become very popular with the small investor and is becoming predominant in the new and developing residential areas, particularly within Port Macquarie around the new University and Base Hospital.

Investors are generally purchasing off the plan within these new subdivisions and constructing a variety of styles of development. These range from two attached villa style properties, two attached townhouse style properties or a single dwelling with attached (or detached) granny flat. These developments are permitted by most Councils as part of the original development application.

The price range for this style of development is from about $550,000 to $750,000 depending on the style, size and quality of the construction. The

initial outlay and good rental returns resulting in a good yield are the major benefits of this type of development. Other fringe benefits include lower stamp duty and higher tax depreciation offsets compared to, for example, buying two older investment properties.

Another positive feature of these types of properties are that most are able to be strata titled in the future if required. This provides the developer flexibility with their investment, allowing them to sell off one and reduce the mortgage and enjoy the return from the other or sell both off generally for a healthy profit.

Another small project that is becoming more popular with the mum-and-dad developer is the purchase of an existing dwelling on a larger than average lot within the major towns in the region, and then adding a granny flat (under 60 square metres) to the rear. This has the great appeal of a significant return on investment for the flat, with the starting price for flat construction from $100,000 and likely rental in excess of $250 per week. When this rental is combined with the rental on the original dwelling it can make for a great yielding and generally positively geared investment property.

We have also noticed an increase in small to medium villa and townhouse developments (four to ten plus units) and consider that these are best left to developers with experience in these types of developments and not novices, because if these


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products are not tailored to the specific market or the sales rates are not as expected, there can be expensive holding costs that can erode profits and cause financial pressure on those without extensive cash reserves to call on.

NSW Central CoastIn many ways, the Central Coast’s real estate market is the beneficiary of values rising within the Sydney market. The point was reached some time ago in Sydney where would-be investors with spare cash and ambitions to build wealth using property as a base were squeezed out due to the widening gap between affordability and property values.

Being an immediate neighbour north of Sydney means that it’s just short drive up the M1 freeway to reach our region and this has been recognised by those displaced investors. The word is certainly out that the coast is the place to be.

A drive around the region’s main centres reveals there is activity aplenty in new developments, lots of renovations, big and flashy marketing signs on properties, cranes in the sky and tradies everywhere.

Our only questions are how long will this last and are there indicators of the brakes being applied?

Smaller investors on the Central Coast have traditionally targeted the renovation or dual occupancy markets. This is still the case as evidenced by the constant stream of older houses

purchased, made over and onsold. Those a little more adventurous who have purchased a small development site and built two or three villas have been largely successful provided they have good planning and an understanding builder. Investors with the ability to do so often retain a villa in these developments.

We have found in more recent years this type of development is still being seen, but less so.

What we have found is that as investors have become more sophisticated, diversification has become evident. We are seeing more of these people buy new units and dwellings, often off the plan. The attractiveness is having a ready made product with an instant return without the heavy lifting and in the current market, a rise in capital value before the property is paid for.

Another interesting phenomenon is the number of properties being purchased by investors with an older dwelling in place and immediately adding a second dwelling (previously referred to as a granny flat). This is achievable under current town planning rules which are quite easy to navigate and a degree level knowledge of town planning is usually not required. The percentage returns are quite attractive for this product and we think lenders and insurers also seem quite comfortable with this type of investment at the moment. However, we wonder if there are too many of this type of property emerging

and how long before the service infrastructure system becomes problematic through the strain of extra loads leading to the introduction of additional levies by council on this type of development, thus perhaps eroding investor gains.

Adding a second dwelling is occurring in many parts of the region, but quite possibly more so in the Peninsula areas of Woy Woy, Umina Beach and Ettalong Beach. It’s now almost a case of dual occupancy properties outnumbering the single occupancies. This proliferation, along with the extraordinary growth in values of all property types seen on the Peninsula over the past several years is becoming alarming and in our regular high level reporting to major lenders, the possibility of values becoming unsustainable has been flagged. We say this on the back of prices we see being paid for development sites versus the cost of developing them and end sale prices where we are sure the margins must be thin.

We are regularly seeing small development sites selling on the Peninsula for around the $700,000 mark but up to as much as $900,000. At these levels of buy in, development of two or three villa or townhouse sites in these areas are nowadays more the domain of professional property developers with the necessary skills and backing to make a living from them.


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Other areas where we are seeing more second dwellings include some parts of Bateau Bay, Killarney Vale and Berkeley Vale. These areas are towards the central part of the region and have seen steadily growing values. The presence of villas are less than many other areas and there are virtually no unit developments. Thanks largely to affordable entry price points, good topography and a few locals turned celebrity renovators, this part of the region is deservedly becoming more popular, and at this time, we see no quantifiable evidence of prices paid putting it out of reach of buyers and investors.

The Toukley, Gorokan and Budgewoi areas are also seeing a trickle of second dwellings coming into the area, but the few new investors tend to be sticking to traditional bricks and mortar type properties where acceptable 5% to 6% returns from rental properties are the norm. We have found that these areas are yet to experience the high levels of demand seen in others, but we don’t think this will last - take that as a heads up.

These areas are towards the northern end of the region and sit on the edges of Tuggerah and Budgewoi Lakes. Buy in prices for older style dwellings with renovation (and value adding) potential start at mid to high $300,000 which on today’s property value spectrum is considered comparatively low. Re-sold renovated dwellings regularly sell for well into the $500,000s and the

investor market for villas and townhouses does not appear to have been approached with any great gusto.

Rounding out the renewed level of development occurring in the region, the Gosford City Centre is buzzing with new, large scale (by local standards) residential unit complexes. In fact, when we last looked, over 2,000 units had been approved. Fortunately, they won’t all be built concurrently thus leading to an oversupply situation of disastrous proportions. With few exceptions, most of these developments are shaping up to be good in quality and amenity. Those slightly more sophisticated mum-and-dad investors we spoke of earlier are acting on these developments with take up rates being reported as good. Expect to pay around the $400,000 mark and upwards for units in these developments. A good vibe is emerging here, but we caution would-be investors to closely monitor the number of new developments coming out of the ground and avoid them if an oversupply situation is likely.

The same can be said for new unit developments in the popular seaside suburb of Terrigal. There are a few new unit developments under construction right now and we think they are good value. One in particular by a family based developer who rarely gets it wrong in terms of style and timing has a boutique ethos and this is a real winner – but too late

for investors on this as they have been sold. If it’s any help though, there are still a few available in the development next door.

The purchase and subdivision of a land parcel sounds easy. It’s only a block of land screaming out to be cut into two or three pieces right? Wrong. We suggest that any small subdivision is difficult and costly to complete, so be very careful. We sometimes see smaller investors buying smaller sites for subdivision and sale. Despite the size and availability of englobo parcels, the Central Coast has comparatively few opportunities in this regard, so while we see the odd small subdivision, they are uncommon. Most subdivisions involve larger land parcels which are well out of reach of the small investor in terms of both cost and complexity.

Before putting away the keyboard, we should take a look The Entrance. This is a complex corner of the region. In years past, developers, investors and many other wide eyed Sydneysiders loved the area. Unfortunately, the love was too great and the area suffered badly when the market last crashed. Developers and investors were left in a pretty bad way and lenders were burnt.

While still well short of the halcyon days, weekenders and holiday makers are back to calling The Entrance a great place to visit and stay. The market here has been steady and it isn’t setting any records. We are however, slightly surprised at the subdued level of


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new development occurring. Values haven’t been rising as quickly as some other areas and whilst we are yet to see any real signs, this might change.

NSW North CoastThe Clarence ValleyThe main small development projects in the Clarence Valley are renovations, particularly in Grafton where you will see investors purchase a 1950s original dwelling for approximately $200,000, undertake refurbishment and modernisation works and resell it for closer to the $300,000 mark.

There are a handful of subdivisions situated around Yamba. It has been noticed that some builders are taking advantage of the current strong market conditions and are able to undertake speculative developments (i.e. build for themselves below cost due to builder’s margin and sell for a profit).

The only town planning considerations or rules in relation to these properties are to ensure that you are within the correct zoning for such ventures and watch for Heritage listed properties.

The area has a shortage of selling stock due to the infrastructure upgrades within the Clarence Valley and there are profits there to be made. However, the potential capital gains are not substantial and there is the risk that over capitalisation may occur in the current market place. With small projects in the region it is best to do your research and keep it simple.

Byron and Ballina ShireDual occupancy is the most popular form of small development currently being undertaken in the Byron and Ballina Shires. This is because the rental return is currently so strong for these property types. Studio and granny flats are the most popular form of dual occupancy and you will find these on both rural residential properties and standard residential properties.

Like most local authorities, in the last few years the Byron Shire has relaxed its rules and approval process in regard to dual occupancy developments, hence the surge in this type of development. The increase in this form of development has also occurred due to lack of housing in the area and Council trying to prevent home owners from illegally converting garages and non approved studios for leasing out.

Ballina Shire has also waived their developer fees for secondary dwelling developments and has extended the current scheme until 31 March 2018. It is interesting to note that the population and number of dwellings have been increasing, but the number of persons per occupied dwelling has been decreasing, so it has been the Ballina Shire’s intention to increase the number of small dwellings in the shire through construction of dual occupancies and studios.

The market is not considered to be oversaturated as there is a need for this type of development in both Byron and Ballina Shires and there is little available

stock. Even though premiums are currently being paid for land, costs to build are still relatively low and the overall value exceeds the cost to build, more so in the Byron Shire. As a result, there are definitely strong capital gains to be made on this type of development. It is the vendor’s decision whether to sell up now while the market is strong or retain the property and benefit from the strong rental income.

Lismore/Casino/KyogleThe majority of small projects undertaken within the regional centre of Lismore and to a lesser extent in Casino and Kyogle, generally involves the addition of a second dwelling on an already established block of land with an existing house. Traditionally, such developments are only viable if there is sufficient side access i.e. six metres or more distance from the house wall to the side boundary or if the property occupies a corner site. In such cases the land area needs to be of a sufficient size (generally 600 square metres or more) and the existing house positioned towards the front corner.

Other projects can include a full refurbishment of the house with new kitchen and bathroom being particularly favoured or addition of a bedroom by utilising excess space within a large living room.

Such development tends to occur in older dwellings, particularly those with a bit of character and located in areas within close proximity of the town centre, such as Girards Hill. However, any suburb within Lismore City can benefit, providing the cost to carry


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out such renovation is within budget and not over-capitalised.

Within the last few years, Lismore City Council has been actively encouraging infill and medium density development near the town centre or services such as shopping centres, hospital and medical establishments. This has come in the form of increased floor to site ratio, expressed as a number units per square metres of land.

With profit margins being relatively slim at 10% to 15%, the price level of such developments can be somewhat hedged by a ceiling level, i.e. purchase of any property over $400,000 would increase risk and ultimately the likely profit on the total outlay is generally reduced. Looking for bargains at purchase is usually the first step to ensuring a suitable profit margin is maintained.

The market is relatively thin for small projects within Lismore City as the demand is not significantly strong. Most of the current development projects are for large subdividable residential zoned land of 20 plus lots, large scale rural residential subdivision or spec builders within new estates. The supply of land suitable for splitter subdivision is limited with much of the new residential estates already comprising smaller sites. The once vaunted quarter acre block (1,012 square metres) of yesteryear is now relatively rare within flood free or level sites. There are always some opportunities, however they are quick to be pounced upon and small in number.

Small projects to stay away from include older style brick and tile units in generally fair to moderate condition, particularly if the solvency of the body corporate has question marks or the main structure is in poor repair. These can be expensive to repair and not a fun way to inherit past problems from previous owners.

Also to avoid are flood prone properties with large site areas. Sometimes, the truth is stretched in regard to development potential and ability to subdivide. However, a thorough review of the local environmental plan and development control plan make it very clear what can and can’t be done.

Coffs HarbourBeing a regional area, we see the mum-and-dad developments relegated generally to splitter blocks, dual occupancy and duplex style developments. There are no specific areas where these types of developments are being undertaken. These occur where the small developer looking to increase returns and long term wealth sees an opportunity.

Typically lot sizes in excess of 800 square metres are required to split or subdivide existing house blocks subject to council approval and dependent upon the shape, street frontage and position of the existing improvements on the site. We see this type of development being more financially advantageous within popular locations such as the beach side suburbs of Sawtell, The Jetty precinct, Woolgoolga and rural township of Bellingen where vacant land is

scarce and demand is high. The entry point in these areas for a suitable property to split would range from around $450,000 to $550,000. The more suburban areas of Coffs Harbour could see the entry point at between $375,000 and $425,000.

Rural localities such as Korora to the north and Bonville to the south of Coffs Harbour have undergone zoning changes which allow for subdivision of larger acreage sites into one hectare allotments. These areas are seeing more activity with regard to splitter blocks however we do note they come with greater environmental controls and constraints which may make development less viable in some cases.

We are seeing increased activity for dual accommodation development in the form of granny flats due to council relaxing the red tape and cost associated with approval for these developments. Typically the size of these flats must be 60 square metres or less. They have the potential to rent for $200 to $300 per week depending on location and design.

To a lesser extent duplex development is also taking place within the more modern estates where land has been available at a reasonable cost (sub $200,000) such as Sandy Beach to the north and Valla Beach to the south. This style of development gives good returns with the option to strata title in the future and sell separately for capital gain.


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As property values continue to rise due to demand and the limited supply of land with increasing generations of families living on the same property, we are seeing more and more mum-and-dad developers undertaking options to split blocks and develop dual accommodation. Councils are becoming more relaxed with these styles of development making it easier and less costly to undertake.

We would always caution any would-be developers to take the time to understand and seek out professional advice with regard to local town planning regulations and any constraints associated with each individual property before purchase with the intention of development.

Tamworth The most common small projects undertaken in Tamworth are dual occupancies and subdivision of larger blocks. There has been a notable increase in the construction of dual occupancy dwellings either as two identical units or as one large dwelling with an attached, smaller granny flat at the rear.

Oxley Vale and North Tamworth are where we are seeing the majority of these dual occupancy projects, both constructed and bought, however an increase has also been noted within South Tamworth and Kootingal. In terms of splitting blocks, North and East Tamworth have seen larger blocks split as these suburbs are traditionally older and more tightly held.

As long as the size of the block allows for the construction of two dwellings or subdivision, we have not seen any real issues for developers in achieving their goals.

The buy in price for dual occupancy properties ranges from $250,000 to $800,000 depending on the location and quality of the product. A gross return of 6% plus is the market norm. The construction of new dual occupancy properties does not see a big profit margin in capital gains however provides good investment returns and tax benefits which attract investors.

The market is performing well with a good mix of investors and owner-occupiers. While competition for development sites located within the more tightly held suburbs is high and strong prices are being achieved, there are plenty of development opportunities in other suburbs that allow first time developers the opportunity to enter the market at a reasonable price.

We have seen that particularly within the more tightly held suburbs where houses on larger than standard blocks are available, good profit can be made by splitting the block or building a second dwelling. These blocks can also make good gains by being held long term.

Novices are recommended to think carefully about which suburb they choose for their project as

although the draw of high rents and cheap land may attract them to some of the more inferior suburbs the lack of capital growth and increased risk of property damage makes it more favourable to pay more for a superior area.

Bathurst/OrangeResidential property development is continuing at a fast clip, particularly in a number of subdivisions with vacant lots on the fringes of Bathurst and Orange. In Bathurst a major developer is the Council providing service connected lots. The increased cost of housing in Sydney, the availability of health facilities for retirees and improved transportation are some reasons for the growth. Mass car ownership is also what is making the expansion of the residential limits possible. There is still some way to go before the shops are out of striking distance for practical purposes making residents need to shop as they would if they lived on acreage out of town.

For a new development it might be worth considering a product which in some way is distinctive from the majority. This may be the location or the nature of the development. This can be beneficial for realising future capital gains and maintaining strong returns. An example is a community title development under construction with plans for a pool and a gym. It is unique for the area and it will be interesting to see how the property tracks over time. Consulting your friendly local agent or valuer for what would


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or wouldn’t excite the market is a good idea. The down-side is that it may not fit with the clunk-thump machinery that is geared up for churning out widget-like residential developments. Property development made easy and affordable for many may mean a product indistinguishable from the majority. While the market is firming right now there is potential for oversupply in some pockets and such a property would feel the pinch the quickest. Many developers recognise this and this is pushing up the value of centrally located blocks with development potential, exacerbated by increased density allowances. Accessing greater profits, it seems, may require a greater initial outlay. For smaller investors this is what can make Real Estate Investment Trusts and other property investment vehicles attractive.


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MelbournePrestigeRenovations within inner south eastern suburbs such as Malvern and Malvern East are increasingly popular amongst owners and investors with the region spending the second most on renovations throughout 2015 according to the ABS.

With a large portion of the dwellings in these suburbs being of period style with construction dates ranging from 1890 to 1930, very few of the original style dwellings or even dwellings with dated renovations exist. It has been noted that buyers are willing to pay a premium for properties with dated renovations, with the trend being to renovate according to their personal style rather than redevelop the property.

Due to properties in the area being of higher value, renovations are rarely on a small scale. Most renovations are quite substantial in size and cost, with many opting to fully renovate the interior whilst also extending the existing dwelling. With much of the area affected by various Heritage Overlays, it is of importance that the period façade is retained to preserve the historical significance of the era.

The recent sale of 34 Johnstone Street, Malvern for $3.4 million is a demonstration of what value a quality renovation can add for any mum-and-dad developer. Since its previous sale in November 2013, a significant renovation was undertaken to this 1920s residence, including rear extension, addition of

second storey and full internal renovation. Whilst it is unknown how much was spent on the renovation, the works performed added almost 2.7 times the value of the initial purchase in just under three years, demonstrating the significant value a quality renovation can add to a property in this region.

Source: PDOL

Inner City Renovations are all the rage in the inner city, with the current trend being renovating, extending and restoring classic Victorian and Edwardian terraces. This is occurring in suburbs such as Fitzroy, Carlton, South Yarra, Albert Park and St Kilda amongst others. The key challenge facing owners of these properties is maintaining the heritage façade whilst still being able to modernise the property. To obtain approval in the majority of cases, the house will need to maintain the front two rooms on both

levels if applicable and demolish the rest to build a modern extension, sometimes with a second level attached. One loophole that was exploited several years ago was at 8 Tyson Street in Richmond. Instead of maintaining the façade and building a modern extension, the owners demolished the house completely, built a modern house and laser etched a photo of the original façade onto the front of the house, giving the illusion that the original dwelling was still there.

In Richmond, a nicely renovated single level, single fronted Victorian on 210 square metres recently sold for $1.695 million. It is located within a leafy street in a good part of Richmond. It was purchased in 2010 for $925,000.


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Due to the requirement to retain the façade and the usually tight streets in the suburb, the build contracts are usually higher than they would be for similar works further away from the city. As a result there is a good risk of over capitalisation as the cost to buy and build may outweigh the subsequent sale price. However there is still a good possibility for profit as long as the contract is well managed and the end finish is desirable. We have encountered a large number of owner builder projects where over capitalisation has occurred.

Inner West/North WestIn the inner western and north western suburbs of Melbourne, projects such as dual occupancies and townhouse developments have increased significantly. This has been seen particularly within

suburbs such as Strathmore, Essendon, Ascot Vale, Footscray, Newport, St Albans, Sunshine, Altona and the surrounding suburbs.

There are many town planning considerations to take into account when planning a development. Each council has its own guidelines for multi- unit developments. For example, the Hobsons Bay City Council assesses many factors when considering granting or rejecting a planning permit application. Some of these considerations include whether the development fits in with the neighbourhood character, how the development will affect daylight to existing windows, whether the development will place walls on the external boundaries, how the development will overshadow open spaces and if the development will provide safe access between roads and the individual lots. Within the suburb of Altona recent land sales are indicating rates of between $1,355 and $1,930 per square metre for allotments with permits and between $1,225 and $1,375 per square metre for allotments suitable for development (STCA). 21 Blyth Street, Altona sold on 8 October 2016 for $992,000. It was sold as a vacant allotment with plans and permits for two dwellings.

As shown above, the permit is for the construction of two double storey duplex style dwellings. The allotment size is approximately 514 square metres. The sale price of $992,000 reflects a price per square metre of land of $1,930.

Northern SuburbsPredictably, land size informs the type of development taking place in the inner north of Melbourne. In Brunswick and Brunswick East, four kilometres and six kilometres north of Melbourne’s CBD respectively, where sites tend to be narrow and small, there are less small scale projects with the majority of development centred on larger blocks of apartments along the main thoroughfares of Sydney Road, Lygon Street and Nicholson Street.


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Small scale development is evident in Reservoir and Preston. At 13 Steane Street, Reservoir, a 746 square metre site with a single dwelling sold for $787,000 in May 2016 ($1,055 per square metre). Number 15 Steane Street, Reservoir (on 738 square metres of land with plans and permits for three dwellings) subsequently sold to a different developer for $815,000 in August 2016 ($1,104 per square metre). (Source: Core Logic, 2016.)

Six hundred metres away, 1 Crevelli Street, Preston, on the corner of Crevelli and Tyler streets and opposite a park and Preston North East Primary school, sold to a developer for $1.006 million in August 2015. The 726 square metre site has a street frontage to Crevelli Street of 20 metres and a depth (fronting Tyler Street, Preston) of 37 metres. The land is zoned general residential by the City of Darebin which allows for moderate housing growth, medium density and diversity. Dual occupancy, villa units, townhouses and in certain cases low rise apartment developments are permitted.

The original 1950s dwelling is being replaced with a medium density four-unit development (pictured below). These 3-bedroom, 2-bathroom, 1-garage townhouses are currently being sold off the plan with a quoted price range of $790,000 to $895,000. Assuming total sales of $3.265 million (i.e. $895,000 for the larger unit fronting Crevelli Street and $790,000 for the three other units fronting

Tyler Street), this would appear to be a profitable development.

1 Crevelli Street, Preston (Source: REA Group Ltd, 2016.)

The developer of 1 Crevelli Street paid $1,386 per square metre, a 20% premium on the latest sale on Steane Street, Reservoir. While Crevelli Street, Preston is not the most sought after pocket of Preston, this higher rate per square metre may be attributed to its corner location which allows for four units, each with street frontage, rather than three and a location across the road from the park.

Steane Street, Reservoir and Crevelli Street, Preston are not the most the desirable pockets of these suburbs and it appears that these are high sales.

Outer EastBayswater, Boronia and Kilsyth tend to be experiencing the highest number of two and three

lot subdivisions, with existing owners deciding to subdivide their large sites, capitalising on the higher land values. A recently valued large site in Kilsyth was valued at $640,000 prior to the land being subdivided. Following a two lot subdivision, the rear vacant site was sold for $300,000 while the front renovated property sold two months later for $540,000. Taking into consideration the associated costs of the subdivision, the owners would still have realised a healthy net profit.

In general however, novice developers can expect a 5% to 15% return, the higher percentage being associated with more popular suburbs such as Ringwood and Ringwood East, where the underlying land value is a key component of the overall value.

Subdivisions which include more than three lots tend to be carried out by the larger and more experienced local developers as opposed to novice developers. Zoning, in particular design and development overlays, in Boronia has been a key factor which has unstuck many novice developers unaware of the strict requirements imposed by council. Additionally suburbs such as Croydon have a minimum land size requirement of 300 square metres and at least a three metre driveway for access to rear dwellings thereby again catching out would-be developers aiming to make a quick profit.

Renovating and then selling has become considerably more popular in Ringwood and Ringwood North with buyers tending to pay a small premium for updated


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and renovated properties. However, the existence of such opportunities tends to be scarce, with most would be developers buying with the aim of holding the property for the long term and realising a profit in the future.

The general advice for novice developers within the outer eastern suburbs is to thoroughly research all of the potential costs associated with a development and in general, to stick to the smaller renovation or subdivision projects which have a lower risk and reasonably swift turnaround time.

South East CorridorSmall development projects in the south eastern corridor are most common within the municipality of Glen Eira, especially on the larger blocks found in Bentleigh and Bentleigh East. The most common project we see in these suburbs is the construction of two townhouses (either semi-detached or fully detached) on one site, with the intention to either subdivide or to keep as dual occupancy. Typically these townhouses have their own street frontage, however we regularly see one townhouse built behind the existing. From our experience in this area, complications regarding permits and town planning rules are infrequent, however there have been scenarios of overshadowing restrictions and neighbour complaints holding up the process. Supply of these townhouses in the inner south east is low, with demand high.

MilduraThere are a number of people, often with connections in the building industry, who are active in splitting larger residential lots in the Mildura CBD area. Most of the easy corner sites have already been developed, with recent activity generally being in the construction of two or three townhouses on larger lots where an old house has been either demolished or relocated. The actual profit margin depends on how much labour can be supplied by the developer themselves. Often the developer will also choose to live in one of the new dwellings for a year or so to minimise capital gains tax liability. Demand is strongest for townhouses that include an outdoor living area and have parking for two cars.

There is currently good demand for modern, inner city townhouses, both for rent and to buy. This demand is from baby boomers looking to downsize and from young professionals. We expect this demand to continue. The recent completion of an $18 million riverfront development linking the Mildura CBD with the Murray River will enhance the attractiveness of living close to the CBD.

Renovation of older dwellings can also be financially rewarding and we often see young couples do this in order to build their equity. Recent examples have included the renovation of 1980s brick veneer dwellings, which are often sitting on relatively large lots and in good locations, but which are no longer

appealing due to their dated appearance. Again, to make a decent return, the investor will need to do as much work as possible themselves and make sure they buy in a good location.


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BrisbaneSmall projects in Brisbane are a way for dabblers to dip their toe into the big pool of property projects.

Our city has all the important elements to help make small development fairly low risk. Our buy-in prices for sites are relatively cheap (compared to Sydney and Melbourne at least) plus there are a number of town plans in the region that have created proactive small development zones. Also – despite our fairly subdued overall market – there’s still enough demand for end product, be it vacant land, a new home, or even a townhouse or unit. You can make a profit with most property types, but only if you adopt a smart approach.

Due diligence is essential, even in Brisbane’s relatively forgiving market. Know what you’re buying, know what you’re doing and know what you’re selling. Key to it all is having an understanding of property values… but of course you can call us for help on this front.

Small developers in southeast Queensland like to gravitate towards particular project types.

Most entrepreneurs cut their teeth on one-into-two splitter blocks, particularly within five to 10 kilometres of the CBD. In this radius, many purchasers buy an 809 square metre site with a post war dwelling. Why post war? Demolition or removal will be on the cards. The options are then to sell off the newly titled 405 square metre blocks as

vacant, or shoot for a bit more profit by building two contemporary homes on the sites.

In the Logan City Council area, there’s also an opportunity to build extra accommodation. Logan landlords are constructing one or two-bedroom auxiliary units to the rear of existing dwelling for extra rental return. For these auxiliary units, the living area must be below 70 square metres with only one vehicular crossover to the site. This style of construction is specific to the Logan City Council area. Local government has approved the two properties being rented on separate tenancies – a scenario that isn’t allowed within Brisbane City Council borders.

There are a few other rules worth noting under the small development banner. In Brisbane, splitter blocks must initially have a 20-metre frontage, because the finished allotments will each require a 10-metre frontage to comply with the town plan.

There are options, however, to do something a bit smaller under special conditions. Six hundred square metre sites can be cut into two provided the right criteria is met, such as being within a certain distance of neighbourhood shopping nodes. These sorts of guidelines demonstrate the importance of having a well-informed town planner among your team.

So where can you find these sweet, sweet little projects?

For the splitter blocks on the south side of town, take a look around Camp Hill, Coorparoo, Holland Park, Mt Gravatt, Bulimba and Balmoral.

If heading north, the inner ring offers a band of suburbs from Indooroopilly to Kelvin Grove and as far out as the Kedron/Wavell area. If you’re happy to go further out from our city centre, try Geebung, Aspley, Boondall and Banyo. They’ll provide more affordable buy-in options for first time developers, although remember demand for property tends to ramp up the closer you get to the CBD. Therefore while it can pay to have a go in the outer suburbs, temper your profit expectations and price your end product accordingly.

If you’d like to try your hand at granny flats then Marsden, Shailer Park, Kingston and Logan Central are the best options.

When it comes to the all important question of cost, then for desirably-located properties with easy development potential you’ll be paying $1.1 million to $1.25 million in Camp Hill or Coorparoo, and around $1.2 million to $1.4 million in Bulimba. On the northern side of town the buy-in price can be somewhat cheaper – particularly if you head further out where it’s possibly to grab a site for $700,000 to $900,000. If you want to be closer to town however, it’s $1.1 million to $1.4 million for blue-chip spots such as Paddington or Bardon.

These facts are all well and good, but how hard is it to land a small development site at the moment?


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Well, it’s a little tough. There’s a lot of competition for splitter blocks at present and purchasers are accepting the slimmest of profit margins in order to get a foot on some suitable property. As an example, if you were to buy an 809 square metre property for $1.2 million the value of the 405 square metre allotments once the site is cleared and subdivided is probably $600,000 per allotment, plus you’ll also incur costs during the demolition and subdivision phase. In our reports, we often describe exactly how competitive demand is for splitter projects, with buyers paying premiums that have pushed prices into the very upper limits of the market value range. In these instances the developer is relying on an overall improvement in the local property market to increase the profitability of the venture. In other words, they’re land banking sites that aren’t viable projects now, in the hope they’ll be profitable later.

For this reason, sites that have a holding income offer the most attractive options. Having an income stream while waiting for the market to improve makes these properties worthwhile, but of course this means demand is even higher for these rentable deals, so be prepared to pay handsomely.

Not all small projects are winners of course. We’ve seen cases where developers attempt to do a four-townhouse development or small-scale unit development – but often theses ventures don’t end well for the novices. It’s important to have experience

under your belt and good industry knowledge, as well as access to tradesman and service providers that can get the job done in a reasonable timeframe and within budget.

ToowoombaThe Toowoomba residential property development market experienced a period of robust growth during 2013 to 2015, however has slowed rapidly throughout 2016 to date. A large number of small projects have been undertaken during this time, including one into two lot subdivisions (with and without a new build on the newly created lot), new duplexes and small unit developments and speculative detached housing.

Below is an example of a one into two lot subdivision in South Toowoomba on busy James Street. The existing dwelling was renovated and resold on the smaller 473 square metre lot and the 671 square metre hatchet lot was sold as a vacant lot.

Most of the activity has been concentrated in established suburbs close to the CBD and major shopping centre nodes including South Toowoomba, Centenary Heights, East Toowoomba, Rangeville, North Toowoomba, Newtown and Wilsonton. The 2012 Toowoomba Regional Planning Scheme has encouraged infill development within the plentiful low-medium density residential zone.

In response to community concerns regarding the location and type of unit development, Toowoomba Regional Council is currently undertaking a comprehensive review to determine the future location of units in the city. The term


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South East Queensland Property Overview BreakfastDo you have your tickets?Guest speaker Mr Peter SwitzerTuesday 29 November 2016

For further information, contact Teresa [email protected] or 07 3353 7544

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units encompasses two or more dwellings on one lot, a group of dwellings within the same building or a single dwelling on a lot with an area less than 450 square metres. There would be a series of medium density nodes created under the proposed changes, with the nodes revolving around facilities and services, parks and gardens, high employment facilities and the University of Southern Queensland. The proposed change would mean that unit development would be encouraged within the node areas and discouraged or prohibited in other areas. Some commentators suggest that there may be a rush of applications for properties that will move from unit areas to non unit areas, however this has not been evidenced to date. Under this review, we note that unit developments will be discouraged on hatchet shaped lots in future due to poor demonstrated outcomes to date. Overall, the proposed changes should provide a more orderly approach to infill development and provide superior urban development outcomes.

Market activity has softened during 2016 as an oversupply of residential product has emerged (particularly units), leading to an increase in vacancy rates, a reduction in rental rates and subsequent exit of absentee investors. Opportunities to buy properties with redevelopment potential still exist, however with the current decline in demand for residential product, the market risk has substantially

increased. Larger scale projects therefore should not be tackled by novices.

Gold CoastM1 WestTwo common small development type projects seen in the M1 west region include strata title subdivision of allotments and duplex pair projects.

Subdivision may not be permitted in some cases due to council regulations. A tried and proven loophole regarding subdivision is the alternative of strata title registration. With strata title registration, the original allotment can be divided and exclusive use areas apportioned to each strata titled lot surrounding the dwelling or dwellings, which can be sold separately. An example of a strata title subdivision is a property at Satinay Court, Oxenford. The original allotment comprised a 5,465 square metre allotment including a dwelling with ancillary improvements and dual street frontage. The owners unsuccessfully applied to Gold Coast City Council to subdivide the allotment. The owners then erected a second detached dwelling and gained strata title registration by dividing the allotment into two strata title allotments with Lot 1 having an exclusive use area of 2,229 square metres surrounding the original dwelling and frontage and access via Satinay Court. Lot 2 has an exclusive use area of 2,767 square metres surrounding the new dwelling and frontage and access via Michigan Road.

Another example of a strata title subdivision is Eureka Crescent, Nerang. The original allotment comprised an 846 square metre corner allotment including a dwelling with ancillary improvements and dual street frontage. The owners erected a detached second dwelling and gained strata title registration by dividing the allotment into two strata title allotments. Lot 1 has an exclusive use area of 316 square metres surrounding the original dwelling and frontage and access via the southern boundary road frontage. Lot 2 has an exclusive use area of 327 square metres surrounding the second dwelling and frontage and access via the eastern road boundary.

Duplex pair developments are currently being erected within the Scenic Rise estate at Beaudesert. A developer undertaking a duplex pair construction has to take into account strata title registration fees, marketing and commission fees and profit margin to undertake the project. A recent project was undertaken on a 733 square metre block, with accommodation comprising a 3-bedroom, 2-bathroom, 1-car garage unit and attached 2-bedroom, 1-bathroom, 1-car garage unit with a total gross floor area of 238 square and construction cost of $540,000 including the land component. Expected rental rates are $300 per week (3-bedroom) and $285 per week (2-bedroom) or $585 per week combined, which accounts for a 5.6 % yield (gross) on the project cost of


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$540,000. Similar units in Beaudesert are selling for approximately $250,000 to $320,000. The current low interest rate environment and increase in values of established housing have made duplex type accommodation more attractive and affordable for the first home owner or investor.

Other types of small scale developments undertaken include dual occupancy or multiple dwellings on one title and subdivision of vacant land, however these are less common.

The market in the M1 west region has shown an increase in buyer activity with agents reporting low stock levels, especially in the sub $500,000 market, with an overall gradual improvement in value levels. This provides an environment and opportunities for the small scale developer. Due diligence is a must with any development and novice developers should become familiar with the local market, town planning considerations, strata title registration, subdivision and selling costs and fees and possible profit margins.

Central NorthCentral suburbia has proven to be a little hot spot for mum-and-dad would-be developers with council approving the strata titling and subdivision of many larger land allotments. Typically we have seen people who own existing dwellings on larger land lots strata title the site and build a second dwelling to the front or rear of the property and sell one (or all) off. This

has been driven by not only a lack of listed houses for sale but a concerted effort by the local government to decrease urban sprawl, increase development and also cheap money. One down-side is that there are not as many large land lots available on the central and coastal-north suburban Gold Coast and in future it seems this number will only decrease.

Another popular development has been duplex pairs however as land prices continue to rise these are becoming less feasible. There is a case in Blake Street, Southport where the owners of an original dwelling managed to strata title the allotment and build a duplex pair to the rear in addition to the existing dwelling and sold off all three properties separately. It was successful for a number of reasons: the timing of the purchase of the original dwelling; the fact that the owner was a builder and was able to source quality materials at lower prices; and that the properties were finished and ready for sale towards the peak of the market. It doesn’t work for some, especially if they haven’t engaged a valuer in the early decision making stages of the process.

Any well-priced house in the area is selling at a fast rate and it could be said that there is more room for the strata titling of land as more and more people are forced into duplexes and townhouses as housing affordability becomes more of an issue for the market. Well positioned duplexes are selling well however we do note that the strength in this

segment of the market seems to be based on housing availability and affordability as people would prefer to stay within a certain location rather than move further out where houses and land are cheaper.

Northern SuburbsThe most common small projects tackled by first timers in the northern suburbs such as Coomera, Pimpama, Ormeau and Eagleby are subdividing detached dwelling allotments to create an extra dwelling, duplex pairs and dual occupancy. These small projects have increased over the past 18 months with the new Gold Coast City Plan and more relaxed development approvals from council. One of the loopholes in the Coomera and Pimpama precinct is the ability to have a duplex pair with the subject units being built to the appropriate standard to allow for individual strata title on only 450 square metre allotments as long as the frontage is larger than 15 metres. We are now seeing allotments in developments such as The Meadows and Big Sky taking advantage of this relaxation from council and going on to strata title the units for individual sale. Duplex units are becoming more popular. Local real estate agents who actively market duplex units in the northern growth corridor advise of generally good market conditions currently prevailing for units priced below $400,000. They further report that generally the market for this type of property has improved over the past 12 months, with low stock levels currently available and sale prices showing


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steady growth over this period. Importantly, the firming in the established housing market has had the effect of increasing demand for duplex units, particularly for first home buyers who are being increasingly priced out of the detached housing market.

The duplex pair project buy in price range is between $600,000 and $750,000 for turnkey completed product depending on size of the allotment and size of each duplex unit. New duplex units are achieving from $370,000 to $425,000 depending on size and quality with rentals achieving between $370 and $440 per week. After all associated costs involved with strata title and selling each duplex unit, the profit margins are achieving anywhere from 8% to 12%. Opportunities are there for both making a profit and holding for the long term with rental yields continuing to increase and provide decent yields for each duplex unit before strata title. The market seems to continue to strengthen. Real estate agents are reporting a firming in the northern suburbs with a lack of listed properties and increased buyer activity putting upward pressure on values. Townhouse units still need to be competitively priced in order to sell. Also body corporate fees reduce the return to the investor and are still having a negative impact on price levels. The subject unit’s value is primarily considered to be affected by investor demand and activity. Novices should try to stay away

from these types of projects.

CentralThe most common project is the traditional renovation of the existing dwelling. Spend costs range markedly depending on the quality and degree of renovation.

The latest town plan Gold Coast City Plan version 3 has altered the rules on splitting and subdividing urban residential blocks to requiring 600 square metres per dwelling. Therefore, a parent site of over 1,200 square metres is required for low density zoned residential sites. This has slowed this type of subdivision in the inner city area.

Urban inner city buy in prices can range anywhere from $500,000 up to $1 million depending on location and rear frontage to a lake or canal.

Profit margin expectations are around 10% to 15% with developers often being builders seeking to obtain their builder’s margin as well.

In the outlying rural residential areas subdividing is becoming more common.

This is generally being done on a strata basis with exclusive use areas assigned to each strata site. The owners get approval to build the second dwelling, however they can’t apply to split the parent site until the second dwelling is built.

On near level to easy sloping sites, market evidence to date has shown the new dwelling typically offering 4-bedroom, 2-bathroom accommodation with a double garage on anywhere from 3,500 square metres has been achieving circa $700,00 to around $750,000 in close in rural residential localities including Mudgeeraba, Tallai, Worongary and Bonogin.

The market is currently strong in the central beach front localities for units in smaller developments that may have future redevelopment potential. Typically older style 2-bedroom, 1-bathroom units in a small five or six unit development on a parent site of 600 to 800 square metres start around $360,000 and can achieve up to $450,000 when renovated.

**Gold Coast Property Clock

Houses in central areas are in strong demand, selling quickly and the market is nearing the peak.

Outer areas dominated by high investor ownership are at the peak and possibly oversupplied.

Sunshine CoastOn the Sunshine Coast small development projects are becoming more and more popular with investors starting to have a go. They can be quite difficult to find but they do offer some opportunities that can be pretty lucrative if you do your homework.


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Typically, the small projects and opportunities appealing to mum-and-dad developers are being provided in the new estates. There are a number of designated duplex sites on offer which are being snapped up, largely by investors. As well as these non-strata titled duplexes, we also note the rise of the three bedroom dwelling with a small one or two bedroom studio bolted onto the side. Both these project types allow for rental incomes to be maximised given the two tenancies. There have been limited re-sales within the market to date for these property types so the sustainability of value levels has yet to be proven. Price points are typically somewhere between $600,000 and $700,000 with a yield of circa 5%.

Splitter blocks or infill subdivisions are harder to identify. Given the Sunshine Coast remains a relatively young region, the council town plan has pretty much catered for the region as it has grown. The Sunshine Coast Planning Scheme 2014 has instances of properties being re-zoned in hinterland locations providing the opportunity for a block to be cut off or a small three to six lot subdivision to be undertaken. We do note that with the launch of the new south-east Queensland regional plan, some opportunities may arise from previously fringe properties now being cast into an urban footprint, consequently making these sites available for subdivision opportunity.

The main hurdles with these development sites are typically the minimum lot sizes which vary based on zoning and the local plan for the area. Good town planning advice is critical to ensure that what you want to do is possible. Typical project costs to be considered include council head works charges, professional fees and GST implications.

A big benefit that duplex or splitter block developments offer is that some financial institutions will lend on a residential basis rather than going for a commercial or development loan. Subsequently this may lead to a higher loan to value ratio and less hurdles thus making these small developments attractive.

Hervey BayThe most common type of small project in the Hervey Bay area at present appears to be a mixture of compact infill developments which offer five to ten lots of varying sizes and location. There have also been some owner occupiers with larger two hectare sites taking on the challenge of subdividing to provide additional lots. Properties such as this have been rezoned within the last few years to low density residential LDR 1, with a minimum lot size of 2,000 square metres. Most of these larger sites have reticulated town water available, however sewage services are not council provided so sewage treatment systems are required. Suburbs with these larger lots tend to be located in Wondunna

and Urangan, with sites typically selling between $165,000 to $220,000 depending on the lot size, topography and ancillary improvements such as existing sheds. As with any potential development, it is imperative to investigate proposed infrastructure and surveying fees and driveways (for battle axe access) in order to assess whether the project will be viable in the long run.

Newly developed battle axe site


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The market for vacant land over 2,000 square metres appears to be steady at present, with demand and supply fairly harmonious overall. Construction of new dwellings has improved for local builders in recent times with feedback being very optimistic and positive. Many builders currently have new homes at various stages of construction across the wider Hervey Bay area including Burrum Heads, River Heads, Toogoom and Dundowran Beach.

BundabergThis month we are looking at small development projects in the Bundaberg area that might be undertaken by people not considered to be hard core developers.

There are a few such developments in the area where investors have bought a house on a large rural residential parcel of around two hectares on the edge of town. The minimum lot size in the area is 4,000 square metres and there is the potential, subject to local council rules, to subdivide, providing the house with a generous curtilage and an additional four or five lots of over 4,000 square metres.

There is potential to do this type of small development, however the prospective purchaser needs to do a feasibility assessment on the costs to achieve this and whether the final result of selling off the parcels is positive.

We have seen the recent emergence of a product called a dwelling house that contains a secondary dwelling. Whilst these look similar to a duplex, they are not the same. They must comply with local authority conditions for this type of residence and anyone interested in this type of development should study up on these conditions which include that the secondary dwelling must not exceed 80 square metres of gross floor area and that the secondary dwelling must be occupied by persons who form part of the household that occupies the primary dwelling. At the moment development is fairly slow, with builder-developers having the potential to make the most profits.

EmeraldThere are currently no small development projects taking place across the Central Highlands as it’s not a viable option. The cost to renovate is not recoverable in the current market unless you pick up a bargain well below market value or purchased over ten years ago and have not continued to borrow against the equity when values rose. There have been a few land banking sales but no development taking place. The only active sector from investors is the multi-unit product of duplexes, triplexes and flats which mostly show a gross yield of 10% or higher. Sales of multi-unit product have increased in the past four months.

GladstoneThere is currently no development work of any size being undertaken in Gladstone. Until the current oversupply lessens, developing new units, housing or land is simply not feasible. There are however opportunities to buy properties with redevelopment potential (higher density zonings) in central suburbs providing the investment is for the long term.

RockhamptonRockhampton has normally demonstrated small development projects such as subdivision of one lot into two or strata titling of flats as the best option for first time developers to tackle. Occasionally, subdivision of rural residential blocks (again one into two) on the outskirts of town in areas such as Alton Downs or Rockyview also present opportunities.

Typically older, established areas with larger allotment sizes and a demand for new yet affordable dwellings is where most of this small scale development is seen, as the more modern suburbs generally have smaller lot sizes, negating any further development prospects.

Costs associated with this type of small scale development have become quite high, making projects more risky and less profitable. The necessary costs to be incurred and the risk of profit margins being quite slim are seeing no premiums achieved for property with such potential.


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A prudent purchaser-developer would most likely be looking to hold property for the long term if purchasing now, rather than develop and on sell straight away given current market conditions. Locally, we have seen a recent example of minimal profit made from reconfiguring a double lot (with an existing aged dwelling) and constructing a new second dwelling. The site was originally purchased in 2014 for $264,000, reconfigured and a new, second dwelling constructed that is now under contract for around $320,000. The original aged dwelling is now worth around $200,000 (on a smaller lot). After deducting purchasing and construction costs as well as infrastructure and holding costs etc, profit will be minimal (expected to be less than $30,000). During more buoyant times in the past, this would have been a much more profitable and worthwhile exercise.

Detailed research is the best recommendation prior to undertaking any such activity, whether it be a project tackled by a novice, small scale developer or an experienced developer with many projects under their belt. The market is ever changing and without accurate information such as town planning implications, detailed building costs, knowledge of council fees etc on each individual project prior to commitment, a seemingly simple project can quickly turn complicated.

With affordability being the main attraction to our region at the moment, there could be some long term opportunities presenting themselves.

MackayIt is quite a difficult task to undertake a small scale development and come out in the black in the current Mackay residential market. There have been virtually no small developments (or large scale for that matter) in recent times, except for large developments that have been in the pipeline for some years and are just finalizing.

With land prices at over ten year lows and council charges still at peak market levels, it is not considered viable to subdivide land on a small scale. There have also been limited developments or renovations of dwellings with the express purpose of selling for profit. The key to these types of developments is to obtain the base unrenovated product for a below market or rock bottom price. The difficulty is that the depressed market has seen fully renovated properties sell for less than the cost to renovate. To make these projects viable, renovations usually have to be undertaken by the owner and not outsourced to third party contractors.

What we are seeing in Mackay though, is many investors and developers land banking both sites and older style dwellings in good locations, with what appears to be a strategy to hold until the market improves.

WhitsundaysThere are really no new developments in the Whitsundays to speak of. Some planned developments are just coming onto the market now, mainly land releases of ocean frontages and sought after spots located in Airlie Beach.

Some successful smaller subdivisions have popped up that have been filled with mum-and-dad investors and first home buyers. These are located in Jubilee Pocket and Cannonvale. Land prices range from low to mid $100,000.

There really doesn’t appear to be much on the horizon at this point in time.

The market in the Whitsundays is firming and with all continuing on we hope to see some increase in the not too distant future, including local development moving as well.

TownsvilleThe main small scale development project we are seeing in the Townsville market is typically the splitter and subdivision scenario. These developments usually occur within older established suburbs including Aitkenvale, Pimlico, West End and Currajong where larger lot sizes and house placement readily allow for this type of project.

There remains opportunities for buyers of this type of potential redevelopment to acquire properties in the current soft market environment and hold for


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potential long term capital growth. Consideration however must be given to the holding cost involved in such an investment, with the ideal scenario being for current owner occupation with future potential for redevelopment when market conditions improve.

Over the past five years we have seen an increase in the construction of dual occupancy properties, mostly within the newer residential land estates. These properties however are typically being constructed by builders and on-sold to investors. Whilst there are some dual occupancy lots being offered to the market within the newer land estates, the cost to provide the end product in the current market is unlikely to yield a positive profit margin.

The Townsville property market remains affordability driven and therefore small scale development projects must reflect this environment and offer a product to meets the current needs. Development projects that fail to reflect the current market are likely to find it difficult to move the end product.

CairnsAlthough there is one large unit project poised to commence in the Cairns CBD, unit development in Cairns is otherwise very slow for either large or small unit development projects. Nevertheless there has been a smattering of small development projects take place over the past twelve months, mainly in the form of duplex or two-unit developments, achieved

by either rebuilding on a pre-existing block of land or sometimes in a new estate.

The bottom line is that it is very hard for developers to turn a profit with a new unit development in the current market environment. There are no quick profits to be made, especially if buying a site and developing from scratch, but it may be possible for existing landowners to feasibly carry out a small development with a slim profit margin. Alternatively, with rental market conditions favourable to investors (low rental vacancies, increasing rents) there are opportunities for small rental developments for those prepared to hold for the longer term.


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AdelaideOne of the most common types of small projects is the demolition of an older style dwelling and construction of at least two courtyard style dwellings on the site. There is some tendency to renovate character style properties close to the city but generally purchasers of these types of properties tend to occupy the property rather than renovate and move on. Ongoing zoning changes within varying areas, particularly along main roads, is encouraging higher density developments.

An example of this in-fill development is shown below. The first photo shows a circa 1960s single level dwelling situated on a 696 square metre corner allotment in the suburb of Campbelltown. The property sold in late 2014. Recent zoning changes in this area mean the site has been subsequently developed and four two-storey dwellings have been constructed.

The artist’s impression is shown below.

(Source: real estate.com.au)

There is increasing in-fill development occurring through many suburbs including Warradale to the south-west, Findon and Seaton to the west, Enfield, Clearview and Northfield to the north and Rostrevor and Campbelltown to the north-east.

Town planning considerations vary greatly across the Local Government Areas. Restrictions to development typically include minimum allotment size, minimum frontage and private open space. Depending on the council area, some dwellings need to be constructed as row or group dwellings rather than detached dwellings. This can have an impact on the number of potential purchasers of a development

site. A higher density development requires a larger financial investment which may be unsuitable for a novice investor.

In an area such as Findon or Seaton depending on the property’s location in the suburb, you would expect a buy-in price of at least $450,000 to $500,000 and into the $500,000s depending on the size of the allotment. A general profit margin for small-scale developments would be around 20%.

The small scale project market is performing. Some developers are only demolishing existing dwellings and on-selling newly created allotments, whilst the majority construct new dwellings which are then sold. The development site market is currently positive particularly given the lack of supply in some areas. That can result in a premium price being paid at times. Where there is a greater supply of potential development sites there are obviously a myriad of options for developers which results in less competition and less chance of developers paying too much.

There are opportunities in a number of areas to buy properties with redevelopment potential and make a decent profit. The initial purchase price is an important factor in making a decent profit. It is important particularly for small-scale developers to choose projects wisely and not over-spend on the development site initially. It is difficult to make up


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for lost ground in the construction phase without potentially cutting costs on important items.

It is important for a novice developer to determine the nature of development they will undertake and ensure they are aware of local council constraints. Given the increasing issues with split contracts and the inability for purchasers to obtain funding on affected vacant allotments, it is important for a developer to be aware of these issues particularly where a developer is attempting to sell allotments on a vacant basis rather than being improved.


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The most common projects within the greater Hobart region appear to be renovation and townhouse and villa unit developments.

The majority of renovation projects appear to be within the suburbs of Moonah, Lenah Valley, New Town, Mount Nelson, West Hobart, Bellerive, Lindisfarne and Geilston Bay. Townhouse and villa unit developments are spread throughout the greater Hobart region with the main developments being the construction of an additional dwelling at the rear of a property.

In regard to townhouse and villa unit developments the major consideration or rule to consider is the building envelope size requirement which differs from council to council. Contact with local council is advisable prior to purchasing a property with the intent to construct an additional dwelling or dwellings in order to determine if there will be any restrictions.

Buy in price ranges from $250,000 to $395,000 mostly within Moonah, Lindisfarne and Geilston Bay and $395,000 to $500,000 within Lenah Valley, New Town, Mount Nelson, West Hobart and Bellerive.

The market appears to be steady within the greater Hobart region with prices on the rise. Selling periods appear to be quicker as buyer demand appears to outweigh current stock levels. Interest from interstate buyers has increased with many properties

with development potential subject to council approval being sold within the first few weeks.

Novices should stay away from larger subdivision developments as they can be quite costly and without a sound understanding and past experience with this type of development the costs involved can quickly accumulate. There also appears to be a large number of new blocks available for sale which have been part of new subdivision developments within the past 12 months. The selling period for the newly developed blocks appears to be within a six to twelve month period which would not be ideal for a developer financing a large portion of the development as they would be relying on a quick selling period in order to recoup the initial development costs.


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DarwinThe development sector of the market has remained relatively soft throughout the second half of 2016, primarily due to high barriers to entry and the weakening of the residential market.

If we consider the smaller development project of duplex constructions, typical hot spots include Muirhead in the northern suburbs and Zuccoli and Durack in Palmerston. This segment of the market tends to be dominated by local builders who have the ability to derive margins from bulk land purchases from the developer directly and from the obvious cost efficiencies in completing the construction works in house.

Land affordability and cost of construction are typically the barriers to entry preventing mum-and-dad investors from taking on such a project. The reliance on bringing in experts in planning, finance and construction also comes at a price and can prolong the lead in time to any development, resulting in costly erosion of desired gross profits.

We would advise that any novice investor approach this type of development with caution. It is advised to undertake extensive background research and seek advice from industry experts such as independent property valuers, town planners, local council and real estate agents prior to any commitment to purchase or construct. The use of expert opinion will provide a body of knowledge to assist in making an informed decision about the viability of a

development. Something as simple as completing a basic SWOT analysis, which acts to identify strengths, weaknesses, opportunities and threats of a proposed project can also provide clarity on the likely impacts the development may experience.

The recent decision of the current NT Government to place on hold a policy allowing for dual occupancy of single dwelling (SD) zoned blocks over 1,000 square metres by way of a two lot subdivision has further impeded mum-and-dad investors from entering the development market. The aim of the policy, as described by the NT Planning Commission in the March 2016 discussion paper is as follows:

“… dual occupancy helps to deliver diversity in housing choice and affordability for changing demographics as well as a more compact urban form to reduce urban sprawl and maximise efficiencies through existing infrastructure.”

The benefits of the policy for the average home owner whose land satisfies the 1,000 square metre requirement for subdivision are the opportunity to not only provide an affordable alternative to the broader market within areas typically considered out of reach due to the high cost of entry into that market segment, but also an opportunity to experience the development process on a small scale without many of the disadvantages and pitfalls of more traditional, larger development projects.

On a broad scale, encouraging development promotes growth and opportunity across many other

sectors of the market with obvious flow on effects to the economy. Naturally, any policy needs significant community consultation to ensure that the existing aesthetics and local needs continue to be satisfied. It was not the expectation, nor was it the intent of the policy to see that all residential land over 1,000 square metres should be or will be subdivided. The reality of the situation is that it is unlikely to affect whole suburbs or even entire streets, more likely to be the salt and pepper effect of a small number of properties spread over a number of suburbs and streets.

Given the current downturn in the residential market, it is unlikely to present much of a viable option for would-be novice developers, with market sentiment currently weak. This may present the perfect opportunity to implement the scheme for dual occupancy which would see a very small number of applications likely to be received, allowing for proper and careful application of the policy in real terms and providing the government with an opportunity to test the water. Then, in the event that the market demands more development opportunities and suburb densification, we (the broader market) are in a much stronger position to make more informed choices across a variety of property types and locations.

Variety and sophistication within older established suburbs can be achieved without sacrificing existing community values or expectations with carefully considered and correctly implemented policy.


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PerthInvestors have largely retreated from the Perth small scale development market over the past 18 months however speculation about timing of the bottom of the cycle is rife. Small scale development sites in particular have been on the nose, but with prices in many areas approaching single residential value and reducing the risk profile of these sites significantly, there appears to be a renewed interest in some areas, although not all.

Due to the declining values of resultant units and villas in recent times, the profit available in many developments has dissipated or disappeared altogether. Further, the cost of construction does not appear to have declined in line with what the market may have expected from a subdued labour market. Add to these factors that the likelihood of any short term notable uplift in values of these products is difficult to predict at the moment, the net result is a risk averse market looking for cost savings in all aspects of the development for any proposal to be economically viable.

In lower socio-economic areas such as Armadale in the south-east corridor of Perth, small lot development sites (R30/R40) appear to be attracting no premium whatsoever over and above standard single residential lots.

In the similarly located suburb of Gosnells, investors can take advantage of a development bonus for corner lots where the local council offers a higher

density over and above the listed R-code. When combined with a build and retain scenario, these can allow developers to purchase a decent allotment and retain some income flow whilst they pursue development of the remainder of the site.

However in slightly better locations, there is some sign of an increase in speculative activity. An example of this can be found in Gabriel Street, Cloverdale, where many sites have a zoning of R20/50/100 and offer a variety of development opportunities. The property at 127 Gabriel Street transacted in May 2016 for $535,000, whilst an almost identical property situated at 131 Gabriel Street transacted in July 2015 for $610,000. More recent activity indicates a higher level of interest in similar properties above $550,000.

Further south in the coastal town of Mandurah, there appears to be a long term focus from speculative investors as opposed to any short term development plan. Supply of end products appears to have peaked just as the wider market cycle has reached or is approaching the bottom, resulting in infrequent development starts in the past six months. Various zonings within the area are also having a significant influence on subdued development conditions, with compulsory two storey street front development requirements clashing with a negligible sale premium for these products over single level construction.

In the Pilbara region, we start to see more extreme examples, such as a property on Richardson Street

which has recently transacted. The property features a basic dwelling in average condition situated on a 956 square metre allotment fronting the Port Hedland foreshore. During the peak of the mining boom, the property was subject to a Development Approval for 23 units and was purchased for $2.2 million. However as market conditions declined rapidly, development of the allotment was no longer viable. The property has recently transacted for a figure below $550,000, which indicates minimal premium over and above a standard single residential allotment.

While it may have become more attractive to purchase development sites in the current market, we urge caution to all novice developers. The economic viability of many developments is extremely fragile with any unplanned expenses likely to push the development into the red very quickly. Relatively simple duplex developments are likely to offer a more comfortable risk profile, particularly on a build and retain basis. Profit margins may be smaller, however they reflect a lower risk than multi-lot development in the current market.

South West WAWhile the South West population has continued to grow throughout 2016 we have seen a general weakening in the residential market in most localities. As housing has become more affordable we have seen a shift in purchasing trends from small residential allotments of 200 to 400 square metres,


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to larger residential allotments. Mum-and-dad purchasers have turned their focus to properties with larger backyards for the kids and the dog as these products have now become more affordable.

Mum-and-dad investors are also jumping into lower risk small scale developments. Some are developing now and others holding on to these types of properties for future development. This is seen as a way of setting themselves up or a nest egg for the future. The most common small scale development occurring in the South West is in the inner established areas where large residential lots are being subdivided into two or three residential strata developments comprising townhouse or villa style construction. This is being seen in such suburbs as South Bunbury, East Bunbury, Carey Park and Busselton.

With the market weakening, this type of development is becoming less viable with tighter profit margins, leaving many investors deciding to purchase and hold on to these properties for development down the track. Mum-and-dad purchasers are in less need of a fast turnaround time on development and are often in a position to hold on to such properties if the development is not viable now.

For mum-and-dad purchasers who want country living, there is some evidence of rural residential

properties which are improved with small and old houses or liveable sheds. The intention is to then develop the property with a second larger dwelling. Most purchasers of this type of property are choosing to live in the existing dwelling for a couple of years until the owners have enough savings to build the dream home. However this is more often than not a situation where cost does not equal value and the properties are over capitalised. In most situations this type of development still goes ahead as owners are driven by the want for the so called dream home. This is resulting in rural residential properties with two dwellings on one title and in some instances owners are able to subdivide and sell off the original dwelling.


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OverviewWell just add water and see the change.

Below is a photo taken this week from a trip back from Longreach. It is amazing to think that just four months ago this country basically did not have a blade of grass on it. The community is feeling a lot more positive and if this great start is further kicked on by a good wet, that would set up many for the short term at least.

Interestingly while the cattle business is still the talk of the Queensland market, there are some who are looking back at sheep now that cluster fencing and other dog management practices are in place. The cost to re-enter the livestock game with cattle prices where they are has some around this region weighing up the options for sheep as a start at least.

The improved outlook is very early in the piece and only time will tell how this plays out, but we have

seen an increasing level of interest and activity in the sales and as Roger Hill reflects, an unseasonably high level of sales for this time of year in the northern part of the country.

We then have a summary of the dairy market from Roger Cussen who covers south-western Victoria and is a long time dairy market analyst who highlights that despite all the issues of late with milk pricing, operators are just getting on with the job and looking for operational efficiencies and there is not the flood of properties to the market that some might have expected.

The market in both places, just like the people, have proven to be resilient and it appears those holding on for bargain buys may have their hands in their pockets for a while longer yet, with most regions generally having firming value trends despite some recent headwinds.

Enjoy this month’s read.

Contact:Tim Lane National Director, Rural Ph: (07) 3319 4403

South West VictoriaIn mid 2016 there was much well publicised negative press coverage in regard to the dairy farming industry, highlighted by Murray Goulburn’s sudden back dated drop in farm gate milk prices paid to farmers, with income to farmers less than cost of production (below break even point). Added to

this were higher than usual feed costs incurred by farmers due to the drier than usual seasonal conditions sustained since 2013.

Despite the mood in the dairy farm industry, there has not been a flood of farms on to the market from dairy farmers anxious to relinquish dairying and it is anticipated this will continue until farmers are in a stronger financial situation.

Despite the dairy industry being historically volatile, dairy farmers in the main are recognised as being resilient and in response to the current climate, an awakening is emerging regarding management of dairy farm businesses and although their confidence has been shaken, there is presently an element of optimism for the future. There is now a significant focus on cost control with the business strategy being reviewed to reduce debt and rebuild equity rather than chasing profit margin. On farm adjustments are being made to downgrade off farm feed requirements, increase rate of culling of less productive stock and repairs and maintenance treated only on an essential need basis.

While the present economic performance of the dairy farm business is considered paramount with the emphasis on key factors of cash, profit and wealth, it is predicted that in the short term there will be limited to spasmodic market activity. The gradual improvement of the economic situation for dairy farmers should in the longer term result in greater market activity.


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There is presently limited enquiry from the corporate and foreign sector for the purchase of dairy farms and the availability of suitable farms to consider is equally limited. Unless the farm satisfies an absolutely thorough due diligence and the prospect of longer term capital growth is encouraging, it will not be purchased.

The recent sale at auction (September 2016) of a 182 hectare, average dairy farm located just outside Timboon township which sold for $12,355 per hectare, purchased by a neighbour points to an approximate 10% to 15% drop in value from the peak of the market pre GFC.

Contact:Angus Shaw Ph: (03) 5332 7181

MilduraWhile no-one is forecasting any substantial increase in wine grape prices next year, local growers are enjoying more attention from the big wine companies than they have in the past ten years. It seems that wine companies now feel a need to once again compete to source grapes. The reason is a combination of reduced supply and improving export markets.

A recent media release from Wine Australia reported that exports of wine to China have increased 51% this year, with China now Australia’s largest export destination. Exports to China have increased from $27 million in 2005 to $474 million in 2015. While

much of the wine is exported in bulk, there is also solid growth in the bottled segment.

The recent purchase of a number of large wine grape vineyards by buyers intending to redevelop them to either almonds or table grapes will reduce wine grape production. Current examples are a 60 hectare vineyard at Gol Gol and a 46 hectare vineyard at Wargan purchased by established table grape growers for redevelopment. These sales follow closely behind the sale of the 900 hectare Del Rios vineyard at Kenley which is in the process of being developed to almonds and the 200 hectare vineyard at Nangiloc which is being converted to dried fruit.

Further eroding the available supply of grapes is the recent purchase of around 320 hectares of wine grapes in the Sunraysia region by China’s third largest wine maker, Weilong Grape Wine Company. This potentially removes approximately 6,000 tonnes of fruit that has historically been sold to local wineries. Weilong has also negotiated to buy land close to Mildura on which they intend to construct a winery, presumably to process their own fruit, but potentially also buying fruit from local growers.

The NSW Government has recently announced plans to construct a $320 million pipeline connecting Broken Hill to the Murray River, a distance of 270 kilometres. This announcement followed a period of uncertainty for the 18,000 residents, who have relied on the Menindee Lakes for drinking water. With the

lakes having run dry three times in the past 13 years, there is clearly a need to shore up their supply. While the decision is no doubt welcome for Broken Hill, it appears to ignore the needs of irrigators below Menindee who were hoping for a policy that would ensure that greater volumes of water would be stored at Menindee in the future.

The dryland cropping sector is looking forward to the coming harvest with optimism with most areas reporting the best crops in decades. However there has been some reports of frost damage in isolated areas which will significantly impact yields. We note a number of crops have been slashed and baled for hay over the past few weeks.

A recent sale in the Underbool area (55 kilometres west of Ouyen) has set new records for the district. Four lots were sold under the hammer comprising a total area of approximately 1,267 hectares. The arable cropping land component analysed to show values of between $1,914 per hectare and $2,042 per hectare which are unprecedented levels for this district. A near neighbour purchased one lot whilst the other three lots were sold to an outsider. The strong levels for cropping land values in the Wimmera and southern Mallee regions appear to be now filtering through to the Mallee area based on demand and value paid for this property.

The pastoral scene remains buoyant. A recent sale was of Huntingfield-Sunshine (11,050 hectares)


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located approximately 100 kilometres north of Wentworth which has no power or permanent water. The property was auctioned and received strong demand. It sold under the hammer for $910,000 ($82.35 per hectare) to a well established grazier from the Ivanhoe district.

A further strong sale in the Ivanhoe area was that of Coolaminya Station, a 32,068 hectare holding sold immediately after auction for $3.367 million or $105 per hectare. It was purchased by a large grazing operation in the district that has land which partly adjoins the sale property.

Contact:Shane Noonan/Graeme Whyte Ph: 03 5021 0455

Country NSWWe regularly describe the residential and commercial markets in terms of their positions within their property cycles and today I would like to do this for the rural market. Across New South Wales, we are generally seeing significant strengthening of underlying land values and this has been underway for approximately 18 months. In terms of where we are on the property clock, I believe we are currently sitting at approximately 9.30 which is somewhere in between a rising market and approaching the peak of the market. We believe that the current trend in the market will continue for approximately 18 months to two years, with a possible peak in 2018. This is based on the current body of feed across all areas

of New South Wales which will give the 2017 season a good start. In addition most irrigation storages in New South Wales are at capacity and irrigators will have a high percentage allocation coming into the next season. This will in turn provide cash flows into the middle of next year further driving the current expansionary aspirations of a large proportion of landholders at present.

Some sales include the smaller irrigation block Wy-Warrie which is 88 hectares and located approximately 15 kilometres south-east of Dubbo. This property included two centre pivot irrigators covering 40 hectares in total and had a large modern shed. The property previously sold as a mortgagee in possession for $560,000 in July 2012 and sold at auction just recently for $1.53 million. This is considered an extremely strong sale even in the current market and is indicative of its location close to Dubbo and riverfront country.

Another sale to the north is the property Elswick which is a 732 hectare grazing property with basalt and trap soils in a 900 mm rainfall area and approximately 15 kilometres east of Walcha. This property sold for $4.1 million which equates to $5,594 per hectare overall and approximately $440 per DSE. The property previously sold in 2012 for $3.4 million.

Contact:Scott Fuller Ph: 0427 077 566

NSW Central TablelandsWe are seeing evidence of continued optimism in the Central Tablelands market.

We are aware of a number of strong sales in the Binalong and Boorowa area recently. The properties sold at auction with spirited bidding from a number of bidders and results exceeding expectations.

One sale was Billabong at 239 White Flag Road, Binalong, a 904.14 hectare property located approximately 21 kilometres south-east of Boorowa and 30 kilometres north-west of Yass. Billabong sold through CBRE at auction in Canberra on 4 August 2016 for a consideration of $5.825 million. The vendor was a Sydney based buyer. Water is a feature of this property which also enjoys extensive frontage to the Boorowa River. This sale indicates a strong value of $6,443 per hectare overall including buildings for a relatively large and well improved holding. The strength of this sale demonstrates the optimism currently prevalent in the market.

This is the pattern of market development we are seeing in a number of Tablelands districts where several strong sales will occur on the back of several previous strong sales, generating growing market optimism in that area.

Another sale illustrating the current market is The Cliffs at 655 Stapletons Road, Molong. The Cliffs sold through local agent McCarron Cullinane Orange


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on 8 August 2016 for a consideration $1.75 million. The sale shows a value of $6,441 per hectare overall including buildings. The 271.7 hectare property is gently undulating open arable country throughout, benefits from Bell River frontage and is generally typical of the appealing country seen around the Cabonne area.

Contact:Craig Johnstone Ph: 0477 800 004

Southern QueenslandThe Southern Queensland market in general has experienced a very good winter and the signs are there especially on the inner downs that many broadacre farmers are about to reap the benefits of the good season to date. The chick pea and wheat crops are looking very good with many areas not suffering from the wet feet that southern areas experienced. At the same time all of the fallow country should have a very good moisture profile which will then set the region up for a potentially good summer.

In regards to the Maranoa region and points further west, they also enjoyed a better than average season with the country generally looking very good. Again, this sets them up for a good summer.

Tongue in cheek, we therefore have a right to ask “How easy can this be?”

Now I do not want to appear to be a doomsayer or the like, however in relation to both the southern Queensland and the broader rural property market in general, I believe it is time to throw some words of caution out there for discussion. Confidence is a very important contributing factor in any decision making process and this would appear to be something that is beginning to become quite abundant. However care must be exercised not to misinterpret confidence with a need to buy for the sake of buying or to keep up with the Joneses so to speak. Whilst there is no doubt we have come off the bottom of the value cycle, with the benefit of hindsight, we are now starting to see the early signs that the southern Queensland rural property market may be about to enter a phase of upward growth in value. The big questions are “How strong will this phase be and how sustainable will it be”?

You don’t have to be Einstein to work out that given the strength of the cattle market (despite the issues of low female numbers in the future), the fair to good seasons primary producers have experienced over the past 12 to 18 months and the fact that the cost of borrowing money has never been cheaper, all the ingredients are there to suggest there is the potential that it could run for some time.

We are now at a point in the cycle reminiscent to the early 2000s and before that the mid 1980s….just prior to the upward run in the respective market

cycles. Unfortunately the lesson we learned from those periods was that what went up ultimately came down. Sustainability is the key and given the multitude of issues that arose from the past two cycles, it should not be a hard lesson to learn. However we sometimes have very short and selective memories.

Of course not everyone suffered from the experiences however whether that was by design or by good luck is perhaps a moot point and won’t impact on future decisions.

Contact :Doug Knight Ph: 07 4639 7600

Northern QueenslandThe unseasonal rain this year has presented similar effects to the North Queensland grazing property market with an unusual number of sale contracts and negotiations under way for this time of the year.

There are about ten contracts of sale in the marketplace at present. This is usually the dry season which corresponds to a low number of property transactions.

The normal marketing and selling period is after the wet from April to June. This year saw limited market activity during this period and things were looking bleak.


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Now that some rain has fallen in winter, things have stepped up a gear and total sales volumes for the year are expected to be within a healthy range from 20 to 25 cattle stations.

Many of the details of transactions are confidential at this stage.

From an independent view point, the sale prices are sensible when duly considered and do not reflect an increase in values from last year. There are some areas where sale value rates this year are showing that they have recovered to the pre drought levels. They are certainly not above the pre drought levels though.

Yes, the volumes have recovered from the slow start earlier this year. No, there is not some great tide of purchasers running around in a frenzy!

Purchasers are getting enough time to do their due diligence and negotiate reasonably priced deals.

Up until recently, the strong cattle market has been good for vendors and has enabled businesses to do some good cattle trades and re-generate cash flow after three very lean years. This has enabled some prospective vendors to pay their bills while they market their stations.

Perhaps with the cattle market coming off a bit lately, property buyers will remain cautious in their due diligence.

Apart from the rain, a good thing for the property market is the low interest rate environment. This would be attractive for some buyers and also positive for existing owners.

At this stage, the recovery in values to pre drought levels is looking good for the district to the north of Richmond, Julia Creek, Cloncurry and Camooweal up to the Gulf. The other area that is showing signs of value rate recovery is from Hughenden to Muttaburra and back up to Prairie.

Contact:Roger Hill Ph: 0418 200 046

Northern TerritoryMount House and Glenroy Stations, located 270 kilometres east of Derby have sold. The adjoining leases have sold to prominent businessman Kerry Stokes. This is the second holding in the Kimberley that Kerry Stokes has purchased this year with the purchase of Napier Downs at the start of the year. One of the main attractions of the two leases is the access to natural waters.

The northern section forms part of the Isdell River catchment and drains into the Walcott Inlet and the southern section is formed by the Adcock and Hahn Rivers. At the time of the sale, the property was relatively undeveloped, however since settlement, the purchaser has embarked on a development program of pastoral infrastructure.

Another possible sale in the Kimberley is Yakka Munga, located approximately 100 kilometres north of Derby. The property has reportedly sold to an international purchaser for an unconfirmed amount. Although the property is a fair quality cattle station, it has good access and proximity to Broome and the ability for further development. If this sale does proceed, this will be the fourth sale to occur in the Kimberley for 2016, with the above mentioned Napier Downs, Mount House and Glenroy and Carlton Hill.

The S Kidman and Co deal has again gained momentum. The aggregation, including two holdings in the Barkly District (Helen Springs/Brunchilly) and the East Kimberley (Ruby Plains), has been on the market since May 2015. The latest party to make an offer is Hancock Prospecting, which is reportedly backed by Shanghai CRED Real Estate Stock Co Ltd, the same party that was involved in the previous deal being negotiated as far as Foreign Investment Review Board (FIRB).


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However, late interest has been expressed by an Australian superannuation fund group and a second late bid by a consortium of pastoralists which would break up the aggregation and attach different properties to their own various interests.

There is continued momentum in the NT pastoral market, with Mount McMinn now offered for sale. This 809 square kilometre pastoral lease reportedly has a carrying capacity of about 5,000 head. We hope to have further details next month.

Contact:Terry Roth Ph: 08 8941 4833


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View of Mount House Station complex from the air

Property Market Indicators

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DisclaimerThis publication presents a generalised overview regarding the state of Australian property markets, using property market risk-ranking scales. It is not a guide to individual property assessments, and should not be relied upon.

Herron Todd White accepts no responsibility for any reliance placed on the commentary and generalised information. Contact Herron Todd White to obtain formal, specific property advice on any matters of interest arising from this publication.

© Herron Todd White Copyright 2016

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Capital City Property Market Indicators - Houses


Capital City Property Market Indicators – Houses

Factor Sydney Melbourne Brisbane Adelaide Perth Hobart Darwin Canberra

Rental Vacancy Situation Balanced market Balanced market Balanced market Balanced market Over-supply of available property relative to demand

Balanced market Over-supply of available property relative to demand

Balanced market

Rental Vacancy Trend Steady Steady Increasing Steady Increasing Steady Increasing Steady

Demand for New Houses Fair Fair Fair Fair Soft Fair Fair Strong

Trend in New House Construction Steady Steady Increasing strongly Increasing Declining Declining Declining Increasing

Volume of House Sales Increasing Steady Steady Steady Steady Steady Steady Steady

Stage of Property Cycle Rising market Rising market Start of recovery Rising market Approaching bottom of market

Start of recovery Approaching bottom of market

Rising market

Are New Properties Sold at Prices Exceeding Their Potential Resale Value

Occasionally Occasionally Occasionally Occasionally Occasionally Almost never Occasionally Occasionally

Red entries indicate change from previous month to a higher risk-rating Blue entries indicate change from previous month to a lower risk-rating


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Capital City Property Market Indicators - Units


Capital City Property Market Indicators – Units

Factor Sydney Melbourne Brisbane Adelaide Perth Hobart Darwin Canberra

Rental Vacancy Situation Over-supply of available property relative to demand

Over-supply of available property relative to demand


Balanced market Over-supply of available property relative to demand

Balanced market Large over-supply of available property relative to demand


Rental Vacancy Trend Increasing Increasing Increasing Steady Increasing Steady Increasing Steady

Demand for New Units Fair Soft Soft Fair Very soft Fair Very soft Fair

Trend in New Unit Construction Increasing Declining - Steady Declining Increasing Declining significantly

Declining Declining significantly

Increasing

Volume of Unit Sales Increasing Steady Declining Steady Declining Steady Declining Steady

Stage of Property Cycle Approaching peak of market

Peak of market Starting to decline Bottom of market Declining market Start of recovery Declining market Bottom of market


Occasionally Frequently Occasionally Almost never Almost never Almost never Frequently Frequently



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1

1

Capital City Property Market Indicators - Retail


Capital City Property Market Indicators – Retail Factor Sydney Melbourne Brisbane Adelaide Perth Hobart Darwin Canberra

Rental Vacancy Situation Balanced market Balanced market Balanced market Over-supply of available property relative to demand





Rental Vacancy Trend Steady Increasing Steady Steady Increasing Steady Increasing Steady

Rental Rate Trend Stable Declining Stable Stable Declining Declining Declining Stable

Volume of Property Sales Increasing - Steady Steady Declining Steady Steady Steady Declining Steady

Stage of Property Cycle Rising market Approaching peak of market

Approaching peak of market

Approaching bottom of market


Bottom of market Declining market Start of recovery

Local Economic Situation Flat Flat Flat Contraction Contraction Flat Flat Steady growth - Flat

Value Difference between Quality Properties with National Tenants, and Comparable Properties with Local Tenants

Significant Significant Significant Large Significant Significant Significant Significant

Red entries indicate change from 3 months ago to a higher risk-rating Blue entries indicate change from 3 months ago to a lower risk-rating


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New South Wales Property Market Indicators - Houses


East Coast New South Wales Property Market Indicators – Houses

Factor Bathurst Canberra Central Coast Coffs Harbour

Far North NSW

Mid North Coast Newcastle Orange South East

NSW Sydney Tamworth


Balanced market

Balanced market

Balanced market

Balanced market

Balanced market

Balanced market


Balanced market

Balanced market

Balanced market

Rental Vacancy Trend Steady Tightening - Steady

Steady Tightening - Steady

Steady Tightening - Steady

Steady Steady Tightening - Steady

Steady Steady

Demand for New Houses Strong Strong Fair Strong Fair Strong Fair Strong Strong Fair Fair

Trend in New House Construction

Steady Increasing Steady Increasing Steady Increasing Steady Steady Increasing Steady Steady

Volume of House Sales Steady Steady Increasing Steady Increasing Steady Increasing Steady Steady Increasing Increasing

Stage of Property Cycle Rising market Approaching peak of market

Rising market Approaching peak of market

Rising market Approaching peak of market

Rising market Rising market Approaching peak of market

Rising market Rising market


Occasionally Occasionally - Frequently



Occasionally Occasionally Occasionally - Frequently

Occasionally Occasionally



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New South Wales Property Market Indicators - Units


New South Wales Property Market Indicators - Units Factor Bathurst Canberra Central

Coast Coffs

Harbour Far North

NSW Mid North

Coast Newcastle Orange South East NSW Sydney Tamworth

Rental Vacancy Situation Balanced market


Shortage of available property relative to demand


Balanced market



Balanced market

Balanced market


Balanced market

Rental Vacancy Trend Steady Steady Steady Tightening Steady Steady Steady Steady Tightening - Steady

Increasing Tightening - Steady

Demand for New Units Strong Fair Strong Strong Fair - Strong Strong Strong Strong Strong Fair Strong

Trend in New Unit Construction Steady Increasing Increasing Increasing Declining - Steady

Increasing Steady Steady Increasing Increasing Increasing

Volume of Unit Sales Increasing Steady Increasing Steady Steady Steady Increasing Increasing Steady Increasing Steady

Stage of Property Cycle Rising market Bottom of market

Peak of market Peak of market Approaching peak of market


Peak of market Rising market Approaching peak of market




Occasionally Frequently Frequently Occasionally Frequently Almost never Frequently Occasionally Occasionally - Frequently




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New South Wales Property Market Indicators - Retail


New South Wales Property Market Indicators – Retail Factor Canberra/

Q’beyan Coffs Harbour Far North NSW Mid North Coast Newcastle South East NSW Sydney Tamworth



Balanced market - Over-supply of available property relative to demand

Balanced market Balanced market Balanced market Balanced market Balanced market

Rental Vacancy Trend Steady Steady Steady - Increasing Steady Steady Steady Steady Steady

Rental Rate Trend Stable Stable Stable - Increasing Stable Stable Stable Stable Stable

Volume of Property Sales Steady Declining Steady Steady Steady Increasing Increasing - Steady Steady

Stage of Property Cycle Start of recovery Rising market Rising market Start of recovery Approaching peak of market

Rising market Rising market Start of recovery

Local Economic Situation Steady growth - Flat Flat Steady growth - Flat Flat Steady growth Flat - Contraction Flat Steady growth


Significant Significant Small - Significant Small Significant Significant Significant Significant



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Victoria/Tasmania Property Market Indicators - Houses


Victorian and Tasmanian Property Market Indicators – Houses

Factor Ballarat Melbourne Mildura Burnie/ Devonport Hobart Launceston

Rental Vacancy Situation Balanced market Balanced market Balanced market Balanced market Balanced market Balanced market

Rental Vacancy Trend Steady Steady Steady Steady Steady Steady

Demand for New Houses Fair Fair Fair Fair Fair Fair


Steady Steady Steady Declining Declining Declining

Volume of House Sales Steady Steady Steady Steady Steady Steady

Stage of Property Cycle Rising market Rising market Start of recovery Start of recovery Start of recovery Start of recovery


Occasionally Occasionally Almost never Almost never Almost never Almost never



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Victoria/Tasmania Property Market Indicators - Units


Victorian and Tasmanian Property Market Indicators – Units

Factor Ballarat Melbourne Mildura Burnie/ Devonport Hobart Launceston



Balanced market Balanced market Balanced market Balanced market

Rental Vacancy Trend Increasing Increasing Steady Steady Steady Steady

Demand for New Houses Fair Soft Fair Fair Fair Fair


Declining Declining - Steady Steady Declining Declining Declining

Volume of House Sales Steady Steady Steady Steady Steady Steady

Stage of Property Cycle Starting to decline Peak of market Start of recovery Start of recovery Start of recovery Start of recovery


Almost never Frequently Almost never Almost never Almost never Almost never



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Victoria/Tasmania Property Market Indicators - Retail


Victorian and Tasmanian Property Market Indicators – Retail

Factor Ballarat Bendigo Melbourne Mildura Burnie/ Devonport Hobart Launceston

Rental Vacancy Situation








Rental Vacancy Trend

Steady Increasing Steady Increasing Steady Steady Steady

Rental Rate Trend

Stable Stable Stable Stable Declining Declining Declining

Volume of Property Sales

Steady Steady Steady Steady Steady Steady Steady

Stage of Property Cycle

Rising market Rising market Rising market Rising market Bottom of market Bottom of market Bottom of market

Local Economic Situation

Steady growth Steady growth Steady growth Steady growth Flat Flat Flat


Small Significant - Large Small Significant - Large Significant Significant Significant



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Queensland Property Market Indicators - Houses


Queensland Property Market Indicators – Houses

Factor Cairns Townsville Whitsunday Mackay Rockhampton Emerald Gladstone Bundaberg Hervey Bay

Sunshine Coast Brisbane Ipswich Gold Coast Toowoomba

Rental Vacancy Situation Shortage of available property relative to demand







Balanced market

Balanced market

Balanced market

Balanced market

Balanced market


Balanced market

Rental Vacancy Trend Steady Steady Steady Steady Increasing Tightening Steady Steady Steady Steady Increasing Steady Tightening Steady

Demand for New Houses Soft Fair Fair Soft Soft Very soft Soft Soft Fair - Strong

Strong Fair Fair Strong Soft


Declining Steady Steady Declining - Steady

Declining Declining significantly

Declining Steady Increasing

Increasing Increasing strongly

Increasing

Increasing Steady

Volume of House Sales Declining Increasing - Steady

Steady Increasing - Steady

Declining Steady Increasing Steady Increasing

Steady Steady Steady Steady Declining

Stage of Property Cycle Rising market

Bottom of market

Start of recovery



Bottom of market


Bottom of market

Start of recovery


Start of recovery



Starting to decline


Occasion-ally

Almost never

Almost never Occasion-ally

Occasionally Occasion-ally

Occasion-ally


Occasion-ally

Occasion-ally

Occasion-ally

Occasion-ally

Frequently



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Queensland Property Market Indicators - Units


Queensland Property Market Indicators - Units

Factor Cairns Townsville Whitsunday Mackay Rock-hampton Emerald Gladstone Bundaberg Hervey

Bay Sunshine

Coast Brisbane Ipswich Gold Coast Toowoomba

Rental Vacancy Situation Shortage of available property relative to demand

Large over-supply of available property relative to demand



Balanced market



Balanced market

Balanced market

Balanced market


Balanced market

Balanced market


Rental Vacancy Trend Steady Steady Steady Increasing

Increasing Steady Steady Steady Steady Steady Increasing Increasing

Steady Increasing

Demand for New Units Very soft Soft Very soft Soft Soft Very soft Soft Soft Fair - Strong

Fair Soft Fair Soft Very soft

Trend in New Unit Construction

Declining Declining Declining significantly

Declining - Steady

Steady Declining significantly

Declining Steady Steady Increasing Declining Increasing

Increasing Declining

Volume of Unit Sales Declining Steady Steady Declining Declining Steady Increasing Steady Increasing - Steady

Steady Declining Declining Steady Declining significantly

Stage of Property Cycle Start of recovery

Bottom of market

Bottom of market



Bottom of market


Bottom of market

Start of recovery

Rising market

Starting to decline


Peak of market

Starting to decline


Occasion-ally

Almost never



Occasion-ally


Occasion-ally

Occasion-ally

Occasion-ally

Frequently Occasionally



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Queensland Property Market Indicators - Retail


Queensland Property Market Indicators – Retail Factor Cairns Townsville Mackay Rockhampton Gladstone Wide Bay Emerald Sunshine

Coast Brisbane Gold Coast Toowoomba

Rental Vacancy Situation Balanced market - Over-supply of available property relative to demand






Balanced market

Shortage of available property relative to demand - Balanced market

Balanced market

Balanced market


Rental Vacancy Trend Steady Steady Steady Steady Increasing Steady Steady Tightening - Steady

Steady Tightening Steady

Rental Rate Trend Stable Declining - Stable

Stable Stable Declining Stable Stable Stable - Increasing

Stable Stable - Increasing

Stable

Volume of Property Sales Steady Increasing - Steady

Increasing - Steady

Steady Steady - Declining

Declining Steady Increasing - Steady

Declining Increasing - Steady

Steady - Declining

Stage of Property Cycle Start of recovery

Bottom of market

Bottom of market



Declining market

Bottom of market

Start of recovery



Rising market

Local Economic Situation Flat Flat Flat Flat Flat Contraction Flat Steady growth - Flat

Flat Steady growth Flat - Contraction


Small Significant Significant Small - Significant Small Small Large Small - Significant

Significant Small Significant - Large



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Northern Territory, South Australia & Western Australia Property Market Indicators - Houses


SA, NT and WA Property Market Indicators - Houses

Factor Adelaide Adelaide Hills Barossa Valley Iron Triangle Mount

Gambier Riverland Alice Springs Darwin Perth South West WA

Rental Vacancy Situation Balanced market

Balanced market

Balanced market

Balanced market

Balanced market


Balanced market



Balanced market

Rental Vacancy Trend Steady Steady Steady Steady Steady Steady Steady Increasing Increasing Steady

Demand for New Houses Fair Fair Fair Fair Fair Fair Fair Fair Soft Soft

Trend in New House Construction Increasing Increasing Increasing Increasing Steady Steady Steady Declining Declining Declining

Volume of House Sales Steady Steady Steady Steady Steady Steady Steady Steady Steady Steady

Stage of Property Cycle Rising market Rising market Rising market Rising market Start of recovery

Stable Approaching bottom of market



Bottom of market


Occasionally Occasionally Occasionally Occasionally Occasionally Occasionally Almost never Occasionally Occasionally Almost never



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Northern Territory, South Australia & Western Australia Property Market Indicators - Units


SA, NT and WA Property Market Indicators – Units

Factor Adelaide Adelaide Hills Barossa Valley Iron Triangle Mount Gambier Riverland Alice Springs Darwin Perth South West

WA Rental Vacancy Situation Balanced

market Balanced market

Balanced market

Balanced market

Balanced market Shortage of available property relative to demand

Balanced market



Balanced market

Rental Vacancy Trend Steady Steady Steady Steady Steady Steady Steady Increasing Increasing Steady

Demand for New Units Fair Fair Fair Fair Soft Soft Fair Very soft Very soft Soft

Trend in New Unit Construction Increasing Increasing Increasing Increasing Steady Declining Steady Declining significantly

Declining significantly

Declining

Volume of Unit Sales Steady Steady Steady Steady Steady Steady Steady Declining Declining Steady

Stage of Property Cycle Bottom of market

Bottom of market

Bottom of market

Bottom of market

Start of recovery Stable Approaching bottom of market

Declining market

Declining market

Bottom of market


Almost never Almost never Almost never Almost never Occasionally Almost never Almost never Frequently Almost never Almost never



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Northern Territory, South Australia & Western Australia Property Market Indicators - Retail


SA, NT and WA Property Market Indicators – Retail Factor Adelaide Adelaide Hills Barossa Valley Iron Triangle Riverland

Alice Springs Darwin Perth South West WA










Rental Vacancy Trend Steady Steady Steady Steady Steady Increasing Increasing Increasing Steady

Rental Rate Trend Stable Stable Stable Stable Stable Declining Declining Declining Stable

Volume of Property Sales Steady Steady Steady Steady Steady Declining Steady Declining Steady

Stage of Property Cycle Approaching bottom of market




Declining market Declining market Approaching bottom of market



Local Economic Situation Contraction Contraction Contraction Contraction Contraction Flat Contraction Contraction Contraction


Large Large Large Large Significant Significant Significant Small Large


Telephone 1300 880 [email protected]

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With offices in every capital city, most regional centres, and right across rural Australia, we are where you are. Our valuers work in the property market everyday, providing professional services for all classes of property including commercial, industrial, retail, rural and residential.

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november 2016 - storage.googleapis.com · entries coloured purple indicate positional change from...

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