4 Townhouses development - Melbourne

$1300sq ish

 

Interesting had an investor friend looking at Melb development sites with DA approvals, projects which could be started immediately, he said nothing makes sense. In other words land has soared and no point developing, there is absolutely no money in it

Also, mentioned that investors are now out of this market and it is only the FHB that is buying.

Anyone looking at buying/building and developing today may need to consider that if more supply comes to market and deals are not making sense we most certainly may be very close to peak. Very easy to lose money

MTR

 

Buyer be were, any developer selling plans and permits usually means there is not money in the project.

A developers building strategy in this market would have to be a buy and hold strategy over a 3-5 year period. The average town planing process takes anywhere from 18 months to 3 years depending on the council and how grand the application is. Aspiring developers are better off buying a property you can lease and create a 5 - 7 year plan for development.

Mark Ribarsky

 

@RIBA I think that the reason why can't stack up is due there isn't that many good deals is changed in regs in April.

If u have someone who bought a 585sqm site for 550k and then got permits for 6 townhouses in the rgz zone which has a end product value of 600k each at 3.6 mil build cost at 1.8mil and sells it for 900k that's rough estimate of 2.7' mil and plus 100-200k others There is still fat in the deal and seen this happen many times. Also a permitted site sold 3.7 mil in Heidelberg heights seems no issue there? And 3 mil in Preston and 3.25 mil in Heidelberg heights. There are deals everywhere if u look hard enough

5-7 years is like building an apartment block man and 18 months is like in manningham or Monash council

 

Typically small scale residential development projects will take anywhere between 4-8months at town planning while you wait for approval. If the process goes smoothly you could be ready to build in a year from the time of purchase. Apartments will probably take longer as you may have take the application to VCAT.

There are probably not as many profitable ready to go sites that there used to be on the retail market. What Mark is saying makes sense depending on the project. There is no right or wrong answer in this instance I think it's case by case.

 

+1 This.
The numbers on this project for argument sake would not stake up today because the cost to buy the land would be way too high.

I would be interested for anyone to post a deal/development today in Melb that stakes up today, and I don't mean land that was purchased 12 months ago.

We have been looking at many DAs in Melb over the last week and not enough fat, I would not touch anything in this market unless you have a minimum of 25% profit.

MTR

 

as you said case by case basis. again also dependant on council. I think probably depends where as but my friend just sold his site bought 500K and onsold for 1.4mil. (actually settlement is today) . Seriously I think mark doesn't even know much about ACZ or a growth zone site.

@MTR - happy to share the numbers when I get further into the process - I bought one recently as in 2 months ago.

 

great look forward to this. Beware, unfortunately some have what's called "the tall poppy syndrome"

 

sure no worries - as haven't settled yet. it was a good buy. (fully renovated etc)
i'm just keen to make gains that's all.

was going to buy in the US and offload my UK places but sometimes timing of the market UK is down now. :-(

 

MTR - see thread on First Development - 3 Townhouses SE Melbourne.
Purchased 4 months ago. Still looking good & stacking up so far but a way to go yet.

 

@craigc i think what @MTR is talking about is current properties purchase in the recent period (couple of months) that will stack up. if it was IPs purchased 12-24 months ago - everything would stack up as prices has risen.

 

Hi Melbournian - yes I saw that - was purchased 4 months ago (recent) & settled last month not an IP purchased 12-24 months ago.
Cheers

 

That’s pretty good then shows that there is still lot of deals in the market @MTR

 

Just looked at it. I think we would need to see what tenders come in at, build costs awfully cheap.
Still seems to have plenty of fat in the deal as long as the design is sorted.

In terms of numbers not stacking up I can only talk about the DA we looked at, same as this project in Thomastown it would not stack up today if you are paying at today's prices in this suburb, we are seeing this in many suburbs in Melb.

Its just part of the cycle, the builders have more fat, developers do not have this luxury.

 

Thomastown definitely esp with the minimum garden req being introduced.
Did you see those George St Sites in st albans - those are not bad (3 blocks side by side corner 1 street away from the station) residential growth zone.

 

Thanks MTR - yeah keeping a careful eye on build costs with Melburnian feedback also. Lost a bed out of one t/h and some m2 out of the small unit (hence some tight sizes) but spoke to REA today for feedback/thoughts and sale prices are pretty close or conservative. So comes down to build costs and final approval.
Thanks for feedback

 

You've still got to be able to sell those apartments. I wouldn't want to be trying to sell those apartments retail or wholesale in those areas now that the stamp duty exemption has been scrapped and mainland Chinese buyers can't get local finance as easy.

 

what apartments you talking about ? talking about townhouses - for that 3 mil site that was sold to a middle eastern consortium. My friend's site in preston they're indonesian. What's your fascination with mainland chinese ? a lot of the RGZ sites are in st albans not Balwyn. You do know that are different types of Asians in Melbourne. End of the day - I rather have a high density site rather than a low density site any day.

 

I've got a good knowledge of Asia, traveled it extensively, been for work and I'm very aware of the demographics in Victoria and interstate. There are obviously different players in the market but the Chinese have had the biggest impact and the new restrictions are what saw their investment in development sites drop 85%.

I assume the 3.7m site mentioned in Heidelberg Heights is the apartment one. You've mentioned some in St Albans as well.

You can go get a permit for as many apartments as you want in St Albans or Heidelberg Heights. Apartments in these areas certainly aren't going to be as popular as townhouses and they will be much harder to sell for a decent price. New design rules make them pricier to build so you'd hope you could sell them retail because buyers could go buy existing houses or units for around the same price.

Many larger developments end up giving stock to wholesalers who used to be able to get rid of them to mostly Chinese buyers, whether it was to Aus visa holders rocking up locally to the display suite or to real estate road shows in Tianjin or 2nd and 3rd tier cities. It's no secret. Now they are trying to pump stock through HK, Singapore etc instead, and they are being successful but they don't just buy anything.

Not as easy now because of the lending situation locally, smarter buyers overseas who have more choice, 50% of new developments have to be sold locally, no more stamp duty savings and new restrictions on lending to developers local and foreign. It has had a big effect and lots of developers have seen it, its also why some permitted sites aren't valued as much as they were back when banks were lending better. Development sites have gotten postponed or sold because of it.

If you bought the land for cheap, got the permit and were able to sell it to someone for a profit then good on you, you did well. Personally i wouldn't want to have to sell off the plan and build an apartment site in St Albans, Heidelberg Heights etc in the next 4 or 5 years.

Everyone is different, if you're confident and have a strategy then go for it, i don't think you'll have the right mix of local and foreign buyers lining up around the corner in this market.

 

This may be interesting for those looking at the market in Melb. I also posted this on resource thread, though helpful seeing we are discussing units/apartments/townhouses.

QBE Australian Housing Outlook 2017-2020 | QBE