Is this Australia’s most promising suburb?
Xander Gagnet, Analyst, Residential Site Sales at Savills talks about Australia’s most promising suburb…
The commentary addressing Sydney’s residential property ‘boom’ over the last half decade has seemingly drowned out the remarkable story developing in one of the nation’s most promising suburbs. However, a series of significant transactions and projects nearing commencement has ensured Macquarie Park is and will remain in the spotlight for some time.
In the last 18 months, Macquarie Park has seen 10 confirmed transactions amassing to over $1.2 billion in site sales providing more than 4,500 potential units. However, these development sales only tell part of the story with over 7,000 dwellings either approved and awaiting commencement or in various stages of the development application process.
Developers aren’t concerned with an over-saturated market due to high clearance rates currently being achieved in off-the-plan sales and gross realisations outperforming early feasibilities. It is understood apartments in these developments are yielding an average realisation as high as $16,000 per square metre of internal area.
The mounting demand for residential accommodation in the suburb has seen both domestic and international developers scramble to acquire the remaining sites. This has been bolstered by the strongest appetite for development sites on record across Sydney as developers take advantage of the built up lack of supply from decades of underdevelopment.
Many of the developers actively seeking opportunities are pure offshore groups or offshore backed local groups with a long term view of the ‘safe haven’ of Australian investment. This means asset performance measures are diminished and building a brand image in Australia is more critical in winning the confidence of local investors. They achieve this through developing landmark CBD projects and due to their lower cost of capital metrics these groups over the past few years have outperformed the market. This has resulted in record breaking results for land bank development assets.
The hot topic concerning Strata Renewal law and the regulations made pursuant to those acts, has brought about a wave of excitement for individual strata owners. Formerly owners were held ransom by developers who have strategically implemented ‘blocking strategies’ in strata buildings. However, due to the law reform, owners of freehold strata are able to terminate their strata scheme through a ‘collective sale’ whereby at least 75% of owners in the scheme agree to sell.
For the owners in 15-21 Cottonwood Crescent, Macquarie Park the strata law reform was welcome news. An amendment to the 2014 Ryde Local Environment Plan saw much of the existing residential flat buildings surrounding the Macquarie Shopping Centre rezoned to B4 Mixed Use with significant uplift in floor space densities and building heights. As a result, an opportunistic developer purchased individual units throughout the buildings to halt any future sale and effectively dictate the future of the site.
Due to the strata law reform, 55 owners across the four strata plans were quick to capitalise on the massive uplift associated with their properties by appointing the Savills Residential Site Sales team to dispose of their apartments through a collective sale. The owners achieved up to 100% above current market value by selling their circa $700,000 apartments for in excess of $1,400,000 each, becoming instant millionaires.
For the purchaser and other developers actively looking in the area, the deal highlighted confident sentiment in the local market as some of the vendors attached a first right of refusal to the sales contract over a new apartment in the future development.
There are few opportunities remaining in the area, and it is advised that remaining owners groups consider working together with adjoining buildings to create an amalgamated site. Developers are willing to pay more for larger sites as they can take advantage of a number of local and state building code efficiencies resulting in more apartments. As a result, the existing owners will benefit from a greater return per apartment than if they were to sell as a single block. Owners realising the uplift associated with their properties should seek the professional advice of sales agents with pure development experience, such as the Residential Site Sales team at Savills.
The team at Savills Australia have over 50 years’ cumulative experience in residential development. Full-life cycle capabilities include: concept analysis, council approvals, valuation and feasibilities, JRPP submissions, planning proposals, pre-sale campaigns, construction delivery and project handover. The Residential Site Sales team have transacted the strongest sales rate per square metre of proposed GFA achieved to date for a collective sale and in the last three years transacted more than $1.7 billion worth of residential development sites. Furthermore, Savills access to offshore capital is second to none having introduced more than $2.7 billion worth of capital into the Australian market since January 2015 and transacting more deals over $10 million than any other agency in Asia-Pacific.
Across Australia, low interest rates and continuing population growth have been driving demand for residential property and will continue to do so. Over the next five years, Australia’s population is forecast to grow faster than all other developed economies. The influx of international capital as a result will continue to support demand for housing that is reinforced by confident investors and owner occupiers within the existing domestic market. However, the incessant migrant growth forecasted especially from Asian countries to well serviced suburbs such as Macquarie Park, is set to see prices in these areas continue their upwards trajectory.
Macquarie Park has seen over 200 hectares of land rezoned to make way for much needed commercial and residential development. Situated within 13 kilometres of all major CBD’s in Sydney, the suburb also boasts New South Wales’ largest suburban shopping centre, one of Australia’s leading universities, a hospital as well as transport by way of two railway stations and the M2 connecting residents and employees to all major arterial routes.
The future of Macquarie Park is also filled with great prospects with the inclusion on the Sydney Metro line, Australia’s largest infrastructure project, and plans to grow into the fourth largest CBD by 2030 with 40,000 employees in over 2 million square metres of net lettable area.
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Xander Gagnet is an Analyst in the Savills Residential Site Sales team. Savills is a leading global real estate service provider offering the full spectrum of services from strategic advice to managing assets and projects and transacting deals. To learn more about Savills, visit savills.com.au.