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Apartment site sales decline around Australia

The total value of development site deals around Australia has suffered a steep 25 per cent decline in the year ending June 2016, according to Knight Frank research.

About $7.1 billion of high-density development sites changed hands during the 2015-16 year with foreign buyers buying 46 per cent of the property in Sydney, Melbourne, Brisbane, Perth and the Gold Coast, down from the previous year when they made up 51 per cent of the value of all purchases.

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The decline in value appears to reflect a decline in available sites in key locations and comes as a clutch of property pundits, including the Reserve Bank of Australia, warn a glut of apartments is looming. New apartment and housing starts have also declined several months in a row, indicating a slowdown has started.

Knight Frank director of residential research Michelle Ciesielski said: "Over the year the average sales rate of sites continued to diverge. Premium sites are achieved for sites ticking all the right boxes but gaining traction at the lower end proved to be more challenging."

While various fees and taxes imposed on foreign apartment buyers could slow the consumer end of the market, they were unlikely to stymie investment in the long term. Concerns about settlement risk remain high, Ms Ciesielski said

"The greater concern for foreign investors is the availability of funds in Australia when borrowing and transferring funds when settling on a new property," Ms Ciesielski said.

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The value of deals per apartment ranged from as low as $20,000 on some parts of the Gold Coast to as high as $650,000 in Sydney's CBD – particularly in areas with good amenity and water views.

The report noted there were 74,650 apartments under construction around Australia, with a further 54,820 units in the marketing stage during the year. Areas earmarked for major infrastructure projects are attracting the most attention from property developers.

More than $4.6 billion of sales took place in greater Sydney, a reflection of the high cost and popularity of that city's property. Yet it was also down 26.9 per cent on the 2014-15 total. Some of the bigger deals included the $130 million sale of the Kimberley Clark building at Milsons Point and the $210 million sale of 47 Spurway Drive, Baulkham Hills, to Sekisui House in February.

North-west Sydney dominated sales activity with more than $2 billion in deals. A further $924.1 million of deals was done in the northern suburbs.

Melbourne is the fastest growing city in the country, with a 2.1 per cent increase in population in 2014-15 that is fuelling growth in projects. About $1.5 billion of development site sales were done during the year.

The inner and north-west suburbs dominated activity with $651 million of sales, averaging $105,000 per apartment. In the CBD, sites worth $243.4 million changed hands, including Chip Eng Seng's $52 million purchase of BPM Corp's Gladstone Street site in South Melbourne, reflecting an indicative rate of $120,000 per apartment.

R. Corporation re-entered the market in June buying Oxford University Press' digs in Normanby Road, South Melbourne, for $32 million.

Foreign buyers increased their activity in Melbourne with their acquisitions making up 46 per cent of the total value, up on last year's 37 per cent.

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