The Development Digest | 8 June 2024

We are pleased to provide you with another edition of The Development Digest.

Please contact me on 0402 085 702 / jesse.radisich@jll.com if you would like to receive our more detailed weekly updates via email each Friday morning.

This update will cover:

• JLL Apartment Market Overview - Q1 2024
• CoreLogic’s Home Value Index – May 2024
• Headlines of the Week

JLL Apartment Market Overview - Q1 2024       

The JLL Research Team have recently released their Q1 2024 National and State Apartment Market Overview and Reports.

Over the next few weeks, the Development Digest will continue to explore key findings and themes from the research report to provide you with as much detail as possible.

We are pleased to provide below our next overview and summary of the report with a national supply focus:

• Approvals and commencements declined substantially over 2023. The HomeBuilder program  (that largely boosted detached housing) has concluded and cost pressures are squeezing building activity everywhere.
• The trough in apartment supply was in 2022, but completions remained moderate through 2023 and Q1 2024.  Just over 12,000 apartments are likely to complete in 2024, which is well below average.
• While the number of approvals for apartments and townhouses has continued to trend down in the major markets in 2024 and approvals are at low levels compared to the average of the last decade.

CoreLogic’s Home Value Index – May 2024 

This week, CoreLogic released their monthly Hedonic Home Value Index report – May 2024, that showed home values rose 0.8% in May, the 16th consecutive month of growth. The mid-sized capitals continue to lead the pace of growth, with Perth rising 2.0% in May, followed by Adelaide at 1.8% and Brisbane at 1.4%.

The JLL team have provided a summary of this report below:

• Rents were up 0.7% nationally in May, in line with the easing trend over the past few months and the lowest monthly change since December 2023.
• Extremely low levels of available supply across the strongest markets provide the best explanation for the difference in growth rates.
• Upper quartile home values across most capital cities have shown the lowest rate of annual growth, demonstrating stronger conditions across the more affordable price points of the market.

Headlines of the Week

The AFR – Spike in auctions drags clearance rates lower

• Melbourne also posted weaker results, with clearance rates at 69.4 per cent, down from 71.2 per cent last week. Clearance rates for the combined capitals edged lower to 71.4 per cent.
• In Melbourne, auction volumes rose 4.4 per cent over the week, but were 43 per cent higher than a year ago.

The Age – Melbourne pipped for house prices

• High interest rates and inflation have failed to dampen the nation’s property market, Brisbane edging out Melbourne to become the second most expensive capital.
• In a sign Melbourne is becoming more affordable for hard-pressed potential home buyers, the median house value was steady at $937,289 while values of units lifted 0.3 per cent to $614,299. Melbourne house values are up a modest 1.9 per cent over the past year, meaning that in inflation-adjusted terms the city has become more affordable.

The AFR – RBA rate rise still likely even after wage review

• Bond markets still expect the next move from the Reserve Bank of Australia will be to raise interest rates this year rather than cut them, even as the Fair Work Commission kept an increase to the minimum wage below 4 per cent to avoid stoking inflation.
• Even so, bond traders are still pricing in a 14 per cent chance that the central bank will raise the cash rate to 4.6 per cent this year and are fully priced for a rate cut by August 2025.

The AFR – Lendlease out to nail interest in $1.8b Sydney timber tower

• Lendlease has begun pitching a $1.8 billion office development in the Sydney CBD to potential capital partners while undertaking exclusive due diligence on a luxury apartment project in central Melbourne, as it moves quickly to lock in the $4.5 billion turnaround plan unveiled last week.
• Meanwhile in Melbourne, Lendlease has entered exclusive due diligence on a site at the prestigious east end of the CBD, where plans are approved for a luxury tower and hotel – potentially worth well north of $500 million. Lendlease is in early-stage talks with the Rich Lister Tarascio family’s Salta Properties over the site at 63 Exhibition Street, according to market sources.

The AFR – Sales of units boom – only at the top end

• Higher selling prices for apartments targeted at downsizing home owners have boosted the construction of units, putting the country on track to record its highest number of completions this year since 2020, new figures from consultancy Urbis show.
• A 26 per cent national increase in apartment selling prices that has made new development projects viable will lift new home completions this calendar year to 28,000, the most in four years when the total was 32,000, the Urbis Apartment Essentials Q1 2024 report says.
• The average price of apartments sold in the first quarter was $1.4 million, the report shows. In Melbourne and Perth the figure was $1.1 million; in Sydney 1.4 million, Gold Coast $1.7 million; and Brisbane $2 million, according to the report.

The Australian – New player rides rental wave at Meadowbank site

• Build-to-rent investment manager apt.Residential has launched a $280m mixed-use precinct in Sydney’s Meadowbank in the first leg of its rollout of a $1.5bn partnership with Dutch pension fund investor PGGM.
• The new entrant to the busy sector is taking an initial focus on projects in the inner suburbs of Sydney, although it has national ambitions.
• The company is now looking at properties ranging from greenfield sites to brownfields assets where there is an existing building that can be reworked, or a project that can be redesigned for the specialist needs of build-to-rent projects

The Australian – Low-income options ‘vanish’ from market PropTrack

• The share of “affordable” rental properties around the country has been cleaved in half over the past year, with just one in 50 properties listed for rent in Sydney an option for low-income families.
• The number of rentals below $400 a week halved over the past year in Melbourne to just 7 per cent, but the tightest market in the country was Canberra (2.1 per cent).
• PropTrack senior economist Paul Ryan said ultra-tight rental vacancy rates have continued push up asking rents around the country. 

We hope you have enjoyed another edition of The Development Digest. Please reach out to our team if there is anything we can assist you with.

Jesse