The State Budget offered a great big green light to new developments with the recent announcement the “Building Boost Grant” a $10,000 grant for those buying new houses and apartments. But for every winner from the housing grants there appears to be several losers from the changes to stamp duty and the rules surrounding the grants. Some clear residential trends towards small and clever development have been delivered some enormous support.
The new grant provides a little cosmetic support to Developers with a current DA, and a kickoff after 1 August, who are prepared to go to market with residential product under $600,000. If they can target first homebuyers with a pretty, cheap product, they may just catch the wave. But all other Developers may find the budget’s changes to their detriment. Those who headed into development in recent months, prior to the 1 August 2011 grant kickoff may find their product unfairly penalised by buyers because it doesn’t qualify for the grant. Some Developers in the category will quite possibly be “sent to the wall”.
First Time new house and apartment shoppers will feel the enormous benefit of $10,000 extra dollars in their pocket plus their 50% discount on stamp duty continuing. But everyone else (owner occupiers on their second homes and investors) will be slugged by the Government when they transact on their purchase, effectively pulling back a large portion of the $10,000 grant into Queensland coffers through the abolition of the 50% discount on stamp duty for owner occupiers.
Perhaps a freeze on all stamp duty would have been a more effective way to reignite the fire under the building and developments industry.
So, how do Developers capitalise? And what trends will this provide support to in our current development marketplace?
We know that the price bracket for investment product is incredibly narrow at the moment. The ceiling is around $550,000 and the competition up to this level is intensifying. The feedback from our clients and the agents is for “small and clever”.
The previous lower size limit of 50 sqm is being actively challenged. As 2 bed units are increasingly dropping below 70 sqm, 50 sqm starts to look big for one bedroom. However, there is more to the story – being cheap and small doesn’t offer enough in an increasingly competitive environment. We are increasingly seeing projects that really push their design “points of difference” to stand out from the crowd, as a balance to smaller offerings.
Lifestyle is another touchpoint with the market, particularly in mixed use developments. Funky retail tenants add to the aura of a project reinforcing the niche/boutique appeal. Who doesn’t want to be a lift ride away from a cool coffee shop?
In our current apartment projects “on the board”, the Ellivo team are exploring the possibilities of true subtropical design, with community skygardens to create usable outdoor spaces. Island benches are out, continuous kitchen to living joinery is in and traditional finishes are being questioned.
The apartment market is highly competitive at the moment with several new project released in the last months, and with a limited number of investors in play. Now more than ever, each new development needs to offer something unique that puts it head and shoulders above the competition.
What trends are you chasing on your projects?