As another year comes to an end, we take time to review the major issues that have impacted the property development industry along the way.
In the residential sector, it has been a year of volatility with regard to the drivers of residential demand.
These have been led by a raft of legislative changes, finance sector reforms and the inevitable end to a booming property market.
In stark contrast to the first half of the year, we have witnessed an exodus of buyers from the eastern capital cities in the second.
It’s not that they are slowing down, it seems they have simply disappeared, sent into a state of hiding from the wrath of a three-year property market tsunami.
Of course, they will emerge again, as they have every time before, but only after they pause to take a breath.
The question remains: will the market fall in their favour?
As a trend, we’ve also observed the apartment buyer market exercise discretion, by increasingly preferencing larger apartment formats, with a savvy desire for better quality residences and enhanced liveability.
Simultaneously, appetite from the banking sector for project funding has been quarantined to the elite few, able to present an impervious balance sheet and untapped equity.
Perhaps this is how it should be, but it doesn’t offer a great deal of comfort to those developers already in the midst of their development program, unable to find precious project finance.
Increasingly, the private sector is being asked to stump up the funding for development projects and whilst it is obliging, for the right borrower, it is doing so at a price.
Ultimately, for those development practitioners that have bought well, on the back of sound metrics and can thereby justify the higher cost of funds, it may make sense.
But for those that bought on the run might not have as much room to move and there will be further casualties.
So, what does all this mean for you as a development industry practitioner?
There are a couple of important take-outs:
Stay informed – whether it’s reading news sources, such as The Urban Developer, or educating yourself through a course, such as the APDI, information is key to making informed decisions.
Maintain relationships – The property development industry is nothing if not interrelated. It is a large and small industry at the same time and given the often-guarded nature of the development industry, if you have sown the seeds of strong relationships with other development practitioners and industry consultants, it can open up a world of knowledge.
Be diligent – The development lifecycle is long and the need for a systematic approach to the management of risk is a given. There is no auto-pilot in the development process and therefore operating by remote control won’t make it happen. Each component of the lifecycle requires a strategy and that is rigorous enough to be implemented but flexible enough to respond to the prevailing conditions. Good systems and good people will offer the greatest chance of success.
Ben Robinson is the managing director of Pontier Advisory, a provider of pragmatic, knowledge based solutions to the property, finance and not-for-profit industry sectors.
He is also the founder and managing director of APDI, Australia’s leading provider of property industry education.
The Urban Developer is proud to partner with APDI to deliver this article to you. In doing so, we can continue to publish our free daily news, information, insights and opinion to you, our valued readers.