Property development is needed to address the housing shortage

If you are a property investor looking to take the next step into developing property, then there’s never been a better time.  Just take a quick look at the current market conditions and you’ll see what I mean.

Australia’s housing shortage is likely to get much worse before it gets any better because construction of new housing continues to fall well behind the number of properties required. We are seeing Australia’s population growing although the ABS reports that at March 2011 growth had slowed slightly over the previous year.  But we still grew by 312,400 people. In contrast, there was a 7% decline in new dwelling commencements (nationally) over 2010-11 to 154,877.

Then there is the continually rising demand for rental properties. The national vacancy rates are now 1.8% and a lot lower in most of the areas of the NSW Hunter Region, where Property Bloom is developing. There is massive demand for new rental stock, and tenants will pay a premium for brand new.

And here’s a tip for what to build:  The changing demographics of Australia – particularly a smaller proportion of couples with children and ageing of the population – is likely to increase underlying demand for smaller dwellings proportionally more than demand for separate houses.

The government’s National Housing Supply Council’s 2010 State of Supply report concludes:

• Underlying demand has continued to grow since the last report (by more than 200,000 households) and is projected to increase further by 2029 (by 3.2 million households to 11.8 million);
• Supply is not responding to this increase in demand (and that the impact of the global financial crisis on residential development in 2008-09 is likely to reduce dwelling completions in the next few years);
• State and territory data on future infill and greenfield supply may be higher than actual delivery of lots (contributing to a larger gap);
• The gap between demand and supply has continued to increase and will continue to increase without any changes to demand and/or supply;

So the writing is on the wall. We need more housing and depending on where you are developing, villas or units will be in demand.  It’s a perfect time to step up and become a developer.  But if it’s your first time, you should use a project manager to guide you through the development process.

At Property Bloom we start by finding suitable and affordable development sites for clients in the right locations where there is good demand for new dwellings.  Then through a detailed process, we’ll guide the project to a result of building anywhere from two to six new villas, more if clients can finance larger developments.  In some areas we are building larger houses, as this is what is in demand right now.  The total cost of a typical development is $650,000, around the price of a two-bedroom unit in Sydney. 

While all the hard work is taken care of, clients can be as involved as they like in the process.  We have some clients who are first-time investors and need their hand held through the process. Others want to learn the development process so they can do it themselves next time. At the other end of the scale there are experienced investors who work in demanding jobs who don’t have time to source development sites for themselves, let alone manage the entire process.  Property Bloom has managed over 45 developments, so we have a tried and tested system in place. 

Using a project manager to handle your development means you are handing over all the detail to someone with the experience needed to successfully manage your investment.  Some of the responsibilities of a project manager include:

• locate suitable sites
• run feasibilities on potential development opportunities
• brief designers and work with them ensure the site is optimised through good designs
• consult with architects, engineers and other technical workers to make sure that design intentions are met.
• interpret plans, estimate costs and recommend reliable suppliers
• manage the planning phase to ensure the fastest possible approvals
• study building contract documents and negotiate with building owners and subcontractors
• manage construction methods and procedures
• co-ordinate the supply of labour and materials
• direct site managers and subcontractors to make sure standards of building performance, quality, cost schedules and safety are maintained
• control payment to subcontractors by valuation of completed works
• communicate effectively and report accordingly
• keep project budgets

Jo Chivers is director of Property Bloom, which manages property development.