High building costs in Brisbane holding back development: Tim Gurner

Construction costs in Brisbane are 30 to 40% above Sydney and Melbourne, and have spun out of control, says developer Tim Gurner.

According to him, despite a firm market, high construction costs are holding back development in Brisbane.

This despite the concerns of an oversupply of apartments in Brisbane and some builders selling at discounts. 

Ahead of a topping out ceremony for the $600 million FV twin towers in Brisbane’s Fortitude Valley, Gurner told The Australian that “it is not the market that is the problem, it is that construction prices are totally out of control”. 

“There have been a huge number of projects in Brisbane that will not get off the ground, not necessarily through the fault of the developer,” he said. 

“No one would have expected construction ­prices to rise 45%, it is unheard of.”

Gurner, who has built more than 5,500 apartments in Victoria and Queensland, said the second stage of FV had construction costs 45% higher than the first, the twin towers Flatiron and Valley House. 

The third building is currently under construction.

Quantity surveyor BMT also said in a recent report that Brisbane construction costs were up to 15% higher than Sydney.

Valuation firm Herron Todd White recently noted that units in Brisbane are in a declining market.

Meanwhile, Metro Property Development recently sold an apartment development site in Manning Street for a huge 35% discount after buying it for $20 million just two years back.  

Brisbane’s off-the-plan apartment sales have been in decline throughout 2016, plunging 37% in the last quarter according to Urbis. Supply of new stock and approvals have reached their lowest level since 2014.

Gurner said the slowdown showed the market regulating itself, as well as the restrictions from the major banks that had dried up funding for Brisbane developments.

FV was underwritten by ANZ, initially for the joint venture with Gurner and Singapore-based Thakral. 

“Although I don’t believe there is an oversupply in Brisbane, and in two years’ time we will be saying there is an undersupply again, if the momentum had continued it would have been a problem,” he said.

“We sold 980 apartments in about 12 weeks and that’s pretty fast. If that momentum did continue for three to five years, I think there could have potentially been a problem.”

Gurner was there to celebrate construction of the complex reaching its 30-storey peak for the 651-apartment towers.