There is one certain rule in property: supply and demand governs the position in the Market Cycle for any region. In this article we will be commenting on the performance of the residential unit market in Queensland.
The supply side of the equation for new residential unit projects is reasonably easy to quantify. A number of reputable information sources are readily available to anyone with access to the Internet. You can subscribe to magazines or newspapers that report on the quarterly movements in the market. Commentators such as Urbis, Place Projects and HTW regularly report the results of their own market surveys. These studies collect information on the NEW apartment projects – those that are approved for development and are on the market for sale. Some of the projects considered in these surveys will be in the pre-sale phase of the development process. Others that may be noted as future supply are sites that have been approved for development by the local authority but may not have a commitment for construction by the developer.
Pre-sales or off the plan sales are a requirement of some the financial institutions prior to releasing borrowings to fund the construction of the building. A certain number of pre-sales contracts are necessary to reduce the funding risk to the project. It also assists the developer to understand what the demand is for his product before he commits to building the project. Sunset clauses in the contracts give the purchasers some comfort that if the building is not completed by a certain date then they will be released from their obligations to settle on the purchase.
Queensland legislation requires a high level of disclosure to protect the purchasers of these off the plan apartments. The SSKB Development Consulting Team works with the surveyors, lawyers and project team in preparing the entitlements and forecast budgets so that a realistic estimate of weekly levies and contractor arrangements can be disclosed to the purchaser prior to signing a contract.
The total demand for apartments however is not as easy to quantify. The surveys mentioned above count the number of reported sales by Developers in new projects. These reported sales are useful to monitor trends in demand for new stock, but the only reliable evidence on the apartment market is the settled sales.
Someone who wishes to purchase an apartment to live in as an owner occupier or to lease out and become an investor also can choose from the available stock of resale apartments. In this case a disclosure document is required to be attached to the contract of sale and this can be obtained from the SSKB Community Managers.
Actual sales data is available from the Titles office and Department of Natural Resources and Mines. Combining this information with the number of reported off the plan sales gives us the full picture for the demand in the apartment market.
Apartment living is becoming a realistic option for residents of our larger cities and towns. The reasons vary for different life stages and age groups, but affordability is often a factor. All have in common the need for access to public infrastructure like parks, open spaces, and public transport, as well as community facilities like schools, universities, employment or medical services.
The key for the residential property market will be for developers considering new projects to take into account real housing demand before commencing their projects. We know from experience that the upward trend in sales will stop at some point – but have we reached the peak?