Unit Construction

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<div>EXPERT OBSERVER</div>
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<div>Apartment construction slowed to the lowest level in half a decade in Q2 2020. </div>
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<div>The slowdown was largely driven by Melbourne and its lockdown, while the other major states have seen things stabilise in this sector. </div>
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<div>Mining construction is now on the rise again in Western Australia, while major engineering projects in New South Wales also provided a timely boost.</div>
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<div>Thanks to engineering, the preliminary figures for construction hardly declined in Q2, down by just -0.7 per cent and holding up at more than $50 billion.</div>
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<div>The quarterly peak was $66 billion in 2017.</div>
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<div>Brighter times ahead for Western Australia on the back of the strength in iron ore and gold. </div>
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<div>As always, there's more detailed analysis from data supremo James Foster <a href="http://jamesfostermacro.blogspot.com/2020/08/australian-construction-activity-in-07" target="_blank">here</a>. </div>
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<p><em><span>PETE WARGENT</span> is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank">blogger</a>.</em><span> </span></p>
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Apartment construction continues to slide

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<p>EXPERT OBSERVER</p>
<p>Units offer affordable options for many looking to enter the housing market for the first time, down size or simply own a pad close to a city centre. </p>
<p>I analysed the CoreLogic Settlement Risk data to show the potential number of new units set to be completed over the coming years and just how the numbers look.</p>
<p>Over the next 12 months, an additional 94,471 new units will be completed nationally.</p>
<p><img src="https://www.urban.com.au/images/2018/8/31/Units%20built%201.JPG" alt=""></p>
<p>This figure represents a 3.5% uplift in total unit supply. Over the next 24 months, the unit supply uplift is expected to be much greater at 251,751 units which is an increase of 9.3% on current supply.</p>
<p>Across the Greater Capital City Statistical Areas (GCCSA), Sydney (76,977) and Melbourne (78,689) are expected to see the greatest increase in unit supply over the next two years.</p>
<p>While the number of unit new units due for settlement is much lower in Brisbane and Adelaide, these two cities are expected to see the greatest percentage increase in new unit supply over the next two years, with CoreLogic data suggesting an uplift of 18.4% and 12.5% respectively.</p>
<p>The top 25 SA3 regions are expected to record the greatest number of new unit settlements over the next two years, Brisbane Inner is expecting an additional 9,732 units over the next two years which translates to an increase in overall unit supply of 29.7%.</p>
<p>Melbourne City is expected to see an 8.1% increase in unit supply over the next two years with an additional 8,040 units while Sydney Inner City is set to add an additional 7,202 units, an uplift of 6.1%.</p>
<p>The top 25 list is dominated by regions of Melbourne which account for 12 of the 25 regions listed while Sydney accounts for nine, Brisbane three and Perth one.</p>
<p>The main difference across the capital cities is that Sydney’s supply of units is set to increase across geographically diverse areas along transport spines while most other cities are seeing the supply increase exclusively within inner city areas.</p>
<p><img src="https://www.urban.com.au/images/2018/8/31/Units%20built%202.JPG" alt=""></p>
<p>Over the past five years we’ve seen a significant increase in overall unit supply.</p>
<p>At the same time, housing market conditions have deteriorated over the past year, particularly in Sydney and Melbourne, with dwelling values falling and rental growth slowing.</p>
<p>In the face of weakening housing market conditions, both of these cities retain a high volume of unit stock to be completed. As the new supply comes on line over the coming years, it is anticipated that this could lead to further</p>
<p><em>Cameron Kusher is a research analyst for CoreLogic</em></p>
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How many units are set to be built over the next two years? Cameron Kusher

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<p>The retirement owner, operator and manager Aveo Group has received planning approval for a $60 million project on the Sunshine Coast.</p>
<p>Set within Harmony, the $3 billion master planned community at Palmview; the 5.4-hectare site will accommodate 138 independent living units, providing homes to more than 200 seniors upon completion.</p>
<p>Aveo will commence construction in April 2018 to be built over five stages featuring two and three-bedroom units, with the first 63 units planned in the first stage with completion anticipated by <span data-term="goog_495085112">June 2020</span>.</p>
<p>Amenities also planned in the first stage include a community centre featuring a café, media room, recreational and entertaining areas, as well as a range of professional health and wellness facilities.</p>
<p>Aveo Group CEO Geoff Grady said Harmony’s location was a key consideration when choosing the site, with the Sunshine Coast experiencing a 21% growth in senior residents in the five years leading up to 2016.</p>
<p>Palmview will be Aveo’s third development on the Sunshine Coast alongside flagship community Aveo Peregian Springs Country Club,</p>
<p>Strategically located in the heart of the Sunshine Coast on 378 hectares, Harmony will deliver more than 4,800 homes for 12,000 future residents, 100 hectares of open space and a 60km network of pedestrian path and cycle ways. </p>
<p>AVID Property Group General Manager Queensland Bruce Harper said intergenerational planning has been an important focus at Harmony since the project’s inception more than a decade ago.</p>
<p>“In the past, most new residential developments really only catered towards younger families, with the expectation that people would move on as their circumstances changed,” Harper said. </p>
<p><span lang="EN-US">“Needless to say, we are thrilled that Aveo Group will deliver a state-of-the-art retirement community right here at Harmony.”</span></p>
<p><span lang="EN-US"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/3/23/Palmview_Streetscape.jpg" alt=""></span></p>
<p>Situated on Harmony Boulevard in Palmview, the community neighbours Sippy Downs, Buderim, Mooloolaba, Maroochydoore and Kawana Waters. </p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/3/22/Palmview_Lounge.jpg" alt=""></p>
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Aveo receives planning approval for $60 million Harmony, Sunshine Coast community

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<p>As Brisbane gears up to reap the rewards of tourism and migration from the Gold Coast Commonwealth Games in 2018, another trend is taking shape.</p>
<p>The price performance between houses and apartments is expected to diverge owing to an oversupply in unit construction, says a new research report.</p>
<p>Apartment approvals in Brisbane are well above their 10-year average, while approvals for new houses remain around normal levels, according to a report by investment consultancy Momentum Wealth, Property Market Spotlight: Brisbane. It suggests that investors should focus on inner-metro houses, with large land content and low supply for better returns.</p>
<p>While demand-side fundamentals are positive, including a growing labour market, population growth, a balanced economy and high housing affordability, the difference in the supply-side fundamentals is of concern. </p>
<p>Momentum Wealth’s managing director Damien Collins says there will likely be “a greater divergence between the performance of houses and apartments, given these supply-side fundamentals”. </p>
<p>In the city’s current growth cycle, which started in the middle of 2012, Brisbane house prices have risen 18.9%, while the median unit price has risen only 11.2%. The median house price (annual) was $497,000 while for units, it was $397,500, the report says. </p>
<p>There have been mixed performances between houses and units over the past 12 months with houses up 4.8% over the year to June 2016 compared to 2.4% growth for units. </p>
<p>Other measures, such as the Corelogic Hedonic Home Value Index October 2016 results, actually have unit values down 1.4%. When analysing either measure, it is clear that units are underperforming against houses in a sign that new supply is beginning to reduce growth. </p>
<p>There are early signs that buyer demand is waning amid record-high levels of residential construction on the back of the 2014 Brisbane Planning Scheme being implemented. The total number of properties listed for sale increased 7.4% over the past 12 months and the number of deals has fallen for the past three quarters. The average time on market for houses and units is 55 days and 74 days respectively, an increase of seven days on the same time last year. Despite this, there remains very little change in discounting within the market, suggesting that owners are being realistic with their asking price. </p>
<p>“The research report explains that as the pipeline of new apartment projects comes to market, it’s going to weigh on rental returns and capital growth for these types of assets, particularly in those areas with a high concentration of new stock.”</p>
<p>“However, the research report shows that the number of houses under construction is in line with the 10-year average, meaning this segment will not reach a state of oversupply at current rates, which will help to buoy prices.”</p>
<p>Top areas with high apartment approvals </p>
<p>The suburbs with the highest concentration of apartments approved for construction include South Brisbane (2,084), Brisbane City (1,731), Newstead – Bowen Hills (1,493), West End (846) and Chermside (704). </p>
<p>“Investors should avoid apartments in areas with high levels of new supply waiting in the pipeline because when it comes to market the new stock will weigh on capital growth of similar stock in the surrounding areas,” added Collins.</p>
<p>“While we don’t expect all of these new apartment projects to go ahead, there will still be a considerable amount of new apartment supply coming to market in Brisbane over the next few years.”</p>
<p>“In the Brisbane market, investors should instead focus on established houses, in inner-metropolitan areas with large land content and low supply.”</p>
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Brisbane to see widening of gap between units and houses

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<p><span>The unit market in Townsville remains flat according to Herron Todd White, who see marked fluctuations over the past five years driven by the clear out of distressed developer stock and number of new unit releases.</span></p>
<p><span>Herron Todd White's September Month in Review said construction costs has forced developers to reduce the size and scope of their product to meet a price point. </span></p>
<p><span>"Another factor to impact the unit market over the past years has been the impact of escalating body corporate fees," the report noted.</span></p>
<p><span>"Our current assessment of the unit market is that it remains relatively flat overall at a combined total of around 50 to 60 new and established unit sales per month. </span></p>
<p><span>"Our unit survey as at the June quarter indicates a supply of 84 new developer units available for purchase. Current supply consists of three new units available in the CBD and 81 in suburban developments (within developments of 20 or more units)."</span></p>
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Townsville's unit market remains flat: Herron Todd White

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<p><span>Construction in Darwin suburbs remains unabated with incentives to first home buyers and the Real Housing for Growth investment program driving investment, according to Herron Todd White's September Month in Review.</span></p>
<p><span>Herron Todd White noted the high construction level of new units the CBD and suburbs</span><span style="line-height: 1.3em;"> Palmerston, Nightcliff, Millner, Coconut Grove and </span><span style="line-height: 1.3em;">Berrimah have a mix of </span><span style="line-height: 1.3em;">medium density, large complexes with ground level and two storey semi detached dwellings.</span></p>
<p><span style="line-height: 1.3em;">"The big shift in the unit market has been seen in the rental market. For the year to June 2015 in the inner Darwin sector,one bedroom units have reduced 9.5%, two bedroom units have reduced 12.5% and three bedroom units have reduced 16.5%," the report highlighted.</span></p>
<p><span style="line-height: 1.3em;">"This has certainly been a welcome relief to all tenants in the market, swinging the pendulum back to the tenant after a number of years in the landlord’s corner."</span></p>
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Incentives driving Darwin property investment: Herron Todd White

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<p><span>A significant boost in unit construction since mid 2005 has seen six major complex built along the Victoria Parade river front in Rockhampton, however over time the average size of units has decreased due to a focus on the bottom line, according to Herron Todd White.</span></p>
<p><span>Herron Todd White's September Month in Review noted s</span><span style="line-height: 1.3em;">maller units equals more units and these have proven to be </span><span style="line-height: 1.3em;">very attractive to the market.</span></p>
<p><span style="line-height: 1.3em;">"Despite the significant boost in unit numbers over the past ten years the attached residential space still reflects only a very small percentage of the entire Rockhampton and surrounding residential markets," the review noted.</span></p>
<p><span style="line-height: 1.3em;">"This has been a key factor in the successful marketing and solid sales rates which have enabled these developments to get out of the ground.</span></p>
<p><span style="line-height: 1.3em;">"In 2005 we saw large spacious 3-bedroom units (160 square metres plus) selling from $330,0000 off the plan compared to Empire where much smaller 1-bedroom units of 50 plus square metres have sold for $330,000 off the plan.</span></p>
<p><span style="line-height: 1.3em;">"Looking forward the notable downturn in the resource industries across Central Queensland and general lack of confidence across the market may result in an extended period where the Rockhampton skyline remains unchanged for some time into the future."</span></p>
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