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News release


2013 transactions show developers renewing focus on residential land in WA

Development market demand continues to grow with over $98m in transactions so far in 2013

PERTH, 4 October 2013 - Western Australia’s recent strong economic profile combined with significant population increases and employment demand is driving strong developer demand in Western Australia, according to Jones Lang LaSalle.

According to Phil Fogliani, Director of Sales and Investments at Jones Lang LaSalle, the company was yet again set for one of its strongest years ever in land transactions reflecting the optimism within the development market.

“We are experiencing a renewed sense of vigour and eagerness among the developers which is translating into genuine competition for sites. So far in 2013 we have just over $98m in land development transactions either sold or under contract. Taking into account a number of other transactions currently in the pipeline this number could swell to well over $130m by year’s end,” he said.

The exceptional volume of transactions illustrates that developer demand is back across the board for sites ranging in value from $1m to $50m. However, cautioned Mr Fogliani, the developer market will continue to be discerning in its acquisition targets. Sites that have immediate or near-term development commencement will be sought after at a premium by developers.

“Competition for projects where development can commence immediately are in high demand within the marketplace. Demonstrating this was the excellent result from a recent campaign which resulted in almost 10 offers at the close of Expressions of Interest – a very competitive process that delivered a cash unconditional result for the vendor,” he said.

The demand for development sites is clearly stretching over both traditional broad-acre subdivisions, group housing sites and high density apartment development sites with many under-bidders still looking to invest in projects.

Mr Fogliani commented that two recent apartment site transactions in Swanbourne and North Perth had separately transacted for a combined value of almost $14m. The real story however, is the number of under bidders from those two campaigns which indicatively reflects almost $55m worth of capital still seeking apartment projects. 

“Based on the depth of bids received we could have sold those sites two or three times over. We are now actively trying to replenish our books with new development stock to try and find a home for the capital that is still looking,” stated Mr Fogliani.

Mr Fogliani said that he expected this year’s demand levels to continue into 2014 with tight rental markets, low interest rates and long term pent-up demand that will continue to push first home buyers into the market, particularly with the increase to the first home buyers’ grant. He said while the northern corridor was a major area for land development in Perth, the southern corridor was the area gaining prominence.

The State Government has followed the example of other states by encouraging first home buyers to build new homes. They will be eligible for a $10,000 first home owners’ grant (FHOG), $3,000 more than the existing amount of $7,000. The increase for new homes coincided with the decision to almost halve the FHOG for established properties from $7,000 to $3,000. The revised FHOG was due to come into effect in September.

Jones Lang LaSalle Senior Valuer, Valuation and Advisory, WA, Craig Carroll said that according to the UDIA’s June 2013 survey the Lots Sold Index had increased by 49.1 per cent year on year. The Southern Metropolitan and Peel corridors are identified as the driver for the increased sales. Young families are increasingly attracted to the range of affordable products available in the southern corridor with 0-4 and 25-34 the fastest growing age groups in the region, according to the latest census figures.

Mr Carroll added that there has been a high level of activity from the first home buyer market below $450,000, particularly in the house and land package markets with many developments of less than 50 lots being essentially 100 per cent pre-committed prior to completion of the development.

“With the current low interest rate and strong rental return dynamic, it is anticipated that bricks and mortar will continue its growth as the renewed favourite amongst the investor market, particularly for those still wary of the past experiences with volatile equity markets,” Mr Fogliani said.

“Furthermore, the current environment is making home ownership more attractive for those undertaking a ’Buy vs Rent’ analysis,” he added.

Key transactions January 1 – August 31, 2013