6 trends for off-the-plan developers to watch in 2022

Director of Property and Research at Ironfish Grant Ryan, has been forensically analysing market trends through the lens of both developers and customers and was recently invited by the Urban Developer to share his thoughts and insights into the risks and opportunities for off-the-plan developments for 2022 and beyond.

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TREND 1:

BUYERS ARE DEMANDING MORE AFFORDABLE, LESS GENERIC DESIGN OPTIONS

Affordability and, more importantly value for money, will be front and centre over the next 12 months.

While apartments that offered value for money have been a growing trend for some 3-4 years before Covid, the impact of more time spent at home during the pandemic turbo-charged the desire from consumers for more quality builds and features in apartments living.

“Investors are drawn to projects that offer real design integrity and a sense of community”, said Grant. “We’re seeing a definite trend away from supersized projects to medium sized projects that offer more outdoor amenities and communal living spaces.”

TREND 2:

RENTAL INCREASES WILL DRIVE MORE INVESTORS BACK INTO THE MARKET

Once again, housing affordability is playing its part in the growing demand for rental properties. While borders are opening up and education and business migrants are set to return, albeit at a much slower pace than we experienced pre-Covid, the reality is that there are simply not enough apartments in the construction pipeline, especially in markets like Brisbane and Perth. The increase in rental demand coupled with buyers demand for projects that offer a unique point of difference represents a strong opportunity for strategic investors.

TREND 3:

INTEREST RATE RISES MAY DISCOURAGE OWNER OCCUPIED MARKET

After 2 years of stability, the predicted interest rate rises may motivate a proportion of the market to pull back on investing. However, as we’re not expecting rates to go very high, this won’t be a huge negative to investors who can claim it as a tax-deductible expense. This is more likely to impact the owner-occupied market who cannot claim interest as a tax-deductible expense.

“Astute investors should not be too concerned about any expected interest rate rises, as the reality is they are still expected to be relatively cheap long term”.

TREND 4:

EXPERIENCED DEVELOPERS ARE PLANNING AHEAD

While developers have a lot be positive about, they should also be cognisant of 2 key risks:

1. Construction costs and projects where feasibilities are reliant on escalation
2. Sales risk for developers who are retail sales reliant

“This is where we’re seeing the importance of developers adopting a strategic approach. Larger projects planned to launch to market in the latter half of 2022 will be subjected to the new buyer demand for quality, less generic products. Experienced developers are planning ahead.

TREND 5:

QLD, SA AND WA HOTSPOTS FOR DEVELOPERS

With the gap between the affordability of houses vs apartments widening, the prospects for apartment growth are very encouraging Australia-wide.

However, Queensland, Western Australia and South Australia are definitely the markets to watch in 2022 and beyond.

“One of the best parts of this latest boom is that it is national, so it’s pleasing to see our customers’ portfolios growing. However, Qld and WA have been what we consider to be underbuilt in the last few years, so the opportunity exists for developers to take advantage of the growing demand .”

TREND 6:

THE BALANCE BETWEEN AFFORDABILITY AND DESIGN INTEGRITY TO BE THE SWEET SPOT FOR DEVELOPERSS

With challenges in construction costs creating more risk, particularly in the high-density apartment space, and buyers becoming far discerning, getting the right project is key.

“One of our greatest strengths is that we are highly selective with who we work with, and due to our longstanding relationships with key developers around Australia, we predict an exciting 3-4 years ahead.”

If you would like to know more about how Ironfish can assist you with your development project, contact an Ironfish Business Development Manager today. Email Us