NRAS and SMSF investors helping keep inner-Brisbane off-the-plan market afloat: David Devine and Ken Woodley

Fewer than 10% of inner-Brisbane apartments are being snapped up by owner-occupiers, with the market the toughest it has been in 25 years, says property developer David Devine.

Devine’s Metro Property Development, which he founded with Ken Woodley in 2010, has been able to build its position of having the top-selling projects in Brisbane by tapping into the investor market, with its Chelsea apartment project in Bowen Hills now completed, five projects under construction and $600 million worth of projects in the pipeline.

“We left Devine three years ago and came out of there with no baggage. We bought all our development sites post-GFC, so there’s nothing hidden in our closet.

“And the banks have backed us to the hilt,” Devine tells Property Observer.

He says a big challenge for other developers is obtaining financing.

Devine says lenders require that 100% of project debt be covered, meaning developers must sell 65% of apartments in a project off the plan to get funding approval.

“Many of the projects that are being marketed off the plan will not achieve the pre-sales requirement demanded by the banks. There is a lot of competition. Very few projects achieve enough sales.”

Metro has just launched its $450 million multi-stage Central Village development in Fortitude Valley, with the first stage featuring 163 apartments over 18 storeys managing 73 sales in its first few weeks since launching. 

Another project – Broadway on Ann featuring 200 apartments in Fortitude Valley – is due to come to market next year.

Metro had the top two selling projects over the September quarter, selling 54 apartments in The Plaza in South Brisbane and 44 in in Brooklyn on Brookes in Fortitude Valley – a joint venture between Metro and Indian-based developer Pearls Australasia, according to the most recent Place Advisory report.

Devine says Metro’s ability to offer apartments to investors that qualify for the federal government’s national rental affordability scheme (NRAS) and that appeal to investors acquiring property through their self-managed super funds are key reasons for its success to date.

Metro’s first completed project, the Chelsea in Bowen Hills, had a 20% NRAS allocation while its Madison Heights project has more than 50% of its 308 apartments available as NRAS investments.

“People that have misconceptions about NRAS have not understood it. It is a stimulus package by the federal government where all stakeholders are winners,” he says.

Metro has also tapped into the overseas market, primarily in Asia, with 20% of apartments allocated to this market.

“We’ve done that 20-odd years. Overseas buyers are the most secure of all sales,” he says.

Devine also says Metro’s “broad-based marketing strategies” have helped underwrite sales in a difficult market.

Devine says he has engaged with people who have helped successfully market his developments at Devine Limited and over a career spanning nearly three decades, including more than $1 billion worth of inner-city apartments completed.

“A lot of people who have worked with us over the years, we have engage to sell our property interstate and overseas.

In other words, says, marketing director Ken Woodley: “We’re a marketing company that develops property, not developer that markets properties.”

Metro has a 10-point checklist for each of it developments, which include that development is situated in a location where people will want to live, that it is close to services and transport.

Metro also chooses locations that embrace Brisbane’s café society and theatre-lifestyle.

Metro's major projects

According to Ken Woodley, the percentage of local buyers – owner-occupiers and investors – has fallen from around 60% to less than 10%, with the fall-off beginning when the RBA lifted the cash rate by 25 basis points on Melbourne Cup Day 2010 followed by further rate rises which “killed” consumer confidence.

Woodley says another three rate cuts are required to bring variable mortgage rates to around 5.9% to reverse this trend.

“We sold 62% of the 439 apartments in Hamilton Harbour [a Devine Limited project] to local buyers. Now it’s down to 8% or 9% are local buyers.”

Metro currently has $600 million worth of committed projects in the pipeline and is the dominant player in the inner-city market.

But Devine says its aim is not market domination but to deliver an attractive proposition to investors.

He says in current market conditions, Metro can deliver around 600 units a year in Brisbane and a bit more in a booming market.