MaxCap funds its inner hipster with Brunswick play
Non-bank lender MaxCap will fund construction of an eight-level mixed-use project in Melbourne’s Brunswick, tapping a niche of older, socially conscious buyers still willing and able to spend money on environmentally sustainable homes.
Work has started on the $27.5 million, 17 Union Street, project after developer Neo Metro sold half of the 38 apartments – at an average cost of $10,700 per square metre – to meet a presales target equivalent to 80 per cent of debt cover, MaxCap Chief Investment Officer Brae Sokolski said.
“They paid a premium, but they’ve got higher leverage and can start quickly because of the lower presales requirement,” Mr Sokolski said.
“Developers are wanting to put product on the market because they feel like the project could fail. Once it fails, even in this sort of time, it can be difficult to resuscitate.”
The second building follows Stage One, a bank-funded larger building with 78 apartments completed in October. Even though the majority of the sales were made before the COVID-19 pandemic struck Melbourne, it showed even in a weaker market for off-the-plan apartments, some niches of the market remained willing to pay for high-quality homes, Mr Sokolski said.
“It is the hipster dollar,” he said. “There’s really strong demand within Brunswick. The investors in this have come from a close radius. It’s getting good local investment support.”
Buyers – 80 per cent of whom were owner-occupiers – in the building with features such as natural ventilation, double-glazed windows, recycled water storage and rooftop solar panels were an older crowd, he said.
“Sixteen of the 26 that are presold were buyers aged 45-plus,” Mr Sokolski said. “You don’t normally get that.”
Units in the BKK Architects- and Clare Cousins Architects-designed building on land Neo Metro purchased from utility VicTrack in 2014 range from 49 to 123 square metres. The project will have two ground-floor retail units and a rooftop garden. One of the two three-bedroom apartments sold in September for $1.2 million.
“We’re still seeing interest in our projects,” Neo Metro director Lochlan Sinclair said.
“If anything, inquiry for the project has gone up. A lot more people are sitting around searching realestate.com.au but the rate of sales hasn’t gone up.”
Interest in other boutique projects is holding up, too. Melbourne developer Hip vs Hype said on Monday that it had sold or reserved 11 out of the 22 apartments in its Ferrars & York project of carbon-neutral apartments in South Melbourne.
The apartments designed by Six Degrees Architects sold at an average cost of just under $12,500 per sq m. The use of solar panels and 100 per cent electric systems enable the building 100 metres from the South Melbourne market to operate fossil-fuel free.
Affordability constraints and economic uncertainty are also increasing interest in different types of housing tenure. Melbourne developer Assemble expects to start construction in the first quarter next year on its 198-unit project in the inner north-western suburb of Kensington after receiving 7000 applications for the units that occupiers can rent for five years and then buy in 2027 at a price fixed now.
“It’s a response to a time when flexibility is king and people are nervous about the market generally,” Assemble managing director Kris Daff said.
“Why wouldn’t you if you can get a forward look at a price 7 years away and if, for whatever reason, the market has materially declined, at least you’re not locked in. But you do get the opportunity to live in a supported build-to-rent environment and see if you like it.”
