Opportunities ahead despite squeeze on residential developers

Commentators are forecasting a contracting market and there is an expectation prices will also stabilise and drop.

While this is great news for housing affordability in NSW, many developers and landowners are wondering how they will continue to deliver quality products at lower rates and where the new opportunities will be.

Despite the predicted market downturn, there are many opportunities for savvy developers. More prominent sites are becoming available as overcommitted developers offload holdings.

There will likely be a surge of buying at particular price levels from investors and first home buyers who need prices to normalise to secure a foothold in the home ownership market.

Developers need to exercise greater caution when securing sites in this changing market, but the fundamentals still apply. Well-located sites in key growth areas will always be a safe bet and provide “value uplift”.

In metropolitan Sydney, infrastructure is key and any areas where significant funding is improving public transport, road networks, health facilities and retail centres are earmarked for growth.

Sydney’s south-west corridor remains a hotspot, supported by substantial improvements to infrastructure including rail network extensions in Oran Park, a new train station in Leppington, the proposed Badgerys Creek airport and the expansion of the M5 Motorway and other key roads.

Another key growth indicator is employment. Strong employment is directly linked to high consumer confidence and a stable property market. The investment in infrastructure in south-west Sydney is tipped to continue and will significantly boost employment security.

The wholesale building model is forecast to become a more favourable option for developers and landowners. It offers a way to release the pressure of the changed residential market and to continue to deliver affordable products and maintain a high quality amid steady profit margins.

The wholesale building model provides significant savings in the build rate for developers. Profitability can be maintained, even when prices are being reduced, helping to maximise revenue from medium and large-sized projects.

Eliminating weighty overheads such as display homes, sales teams and big marketing campaigns means these savings are passed on to developers using the wholesale building model.

The year ahead will put the residential development sector through its paces, yet bring welcome changes to the market, including greater opportunity and improved affordability in some areas.

Savvy developers are acting on new opportunities, while others are looking to do things a little differently, such as using the wholesale building model, to maintain profitability.