In the midst of a shake-up in the property market, it’s a good time for developers to rethink their business strategy and stay competitive.
With a 40% fall in unit approvals from November to December last year, it seems a slowdown in apartment construction is definitely upon us. According to the Q3 Cordell Construction Market Movement Report released in December 2017, this shift away from apartment developments has been particularly significant in NSW.
Falling investor interest in apartments
The signs of this slowdown have been apparent for some time. Government restrictions on foreign investment into residential property introduced in the 2017 Federal Budget along with the rising cost of investor borrowing have started to have a real impact on the investor appetite for residential property. Faced with this abrupt turnaround in demand for apartments, what can developers be doing to secure new finance, projects and buyers?
A remedy for residential developers?
With such strong interest from the investment community in recent years, developers have been able to stay profitable with high volume, low cost projects. They’ve been building to meet the needs of an investment community, with more focus on increasing rental yield and less regard for elements that might be important to owner-occupiers.
According to the inaugural McGrath Property Report published in Spring 2017, more Australians are living in apartments than ever before. Although they might see apartments as an affordable, compact alternative to a detached home, today’s buyers are looking for much more from multi-residential properties. By switching their focus to design and quality, and amping up the community and lifestyle features of a residential project, developers can create a more compelling product for the less volatile owner-occupier market.