There is no doubt all the ‘experts’ and media commentators have now been singing the praises of the Brisbane property market for close to 12 months now, and we’re happy to admit that here at CFMG Capital we’ve most definitely been pushing that bandwagon by authoring and sharing plenty of articles that support this view. However, during that period the extensive commentary around the Melbourne market and its relative strength has proven to be folly. Yes, the extreme price growth experienced in the Melbourne market from 2016-2018 has come to a grinding halt, with some broadacre land markets experiencing a drop of as much as 15-17% in land revenue. Nonetheless, depending on your point of view, those markets are either up 80% from 2016, or down 15% from January 2019 – meaning that depending on how you frame your argument, you can come up with a stat to support it!
In our experience as a land developer operating projects on the ground in both Melbourne and Brisbane, the market in Melbourne from a sales and transaction point of view still remains stronger. While price growth is no longer there, the volume of sales and the strength of those sales is far greater than anything happening in Queensland. We are on the ground, delivering projects in both states and on the coalface when it comes to sales, the appetite for new vacant land in growth corridors in Melbourne remains incredibly strong.
Why? How do we come to this conclusion when every media report there is reports Brisbane as the strongest housing market? The simple fact is that most media reports only focus on the ‘sexy stat’ or the big ticket item – price growth! However, in our experience on the ground in both markets – the type of sale (and the amount of them) remains stronger in Melbourne. When we launch a project in Brisbane, getting pre-sales is the toughest part of the process, particularly when the Development Approval is in place but no construction has started. At this point, we’re effectively asking buyers to buy ‘off the plan’ and use their imaginations as they look at a sitemap or site plan when visiting what is essentially a vacant paddock. We’re good at this, in fact, we reckon we’re just about the best at this in what is a competitive market as we leverage our builder relationships and secure pre-sales very early in the process to get our projects up and running and build momentum during the early part of construction. This requires hard work, plenty of marketing, signage on site, site tours, builder breakfasts and so much more – we’re experts in this field, but acknowledge it’s the toughest part of the process. Contracts are signed, usually with 5-10% deposits and 21-45 day finance clauses as buyers utilise time to get themselves sorted to fully commit to the sale.
Meanwhile down in Melbourne, we recently brought a new project to market – Acacia Village in Wollert. This project is perfectly located 25km north of the Melbourne CBD and is in a strong growth corridor, and is well priced. However, right now, it’s still just a paddock with a Development Approval and no signage, just a website and some brochures. We released the land to market less than a month ago, and already have 7 sales! What’s more, these sales are unconditional upon signing and all include a 10% deposit. When you’re on the coalface in development and launching a new project, that is when you see the true strength of a market. Certainly in my 17 years working in property development up and down the eastern seaboard, there has never been a time in Brisbane when buyers sign unconditional contracts with 10% deposits before a sign is even erected or some dirt is turned! I worked through some pretty big property peaks in that time in Brisbane, particularly way back in 2005/6 – but it never reached a level where buyers were prepared to sign unconditional contracts on the spot, for an off the plan property. To me, this says it all when it comes to how the Melbourne market continues to perform with strong volumes and high-quality sales. Yes, the music has stopped when it comes to extreme price growth, but when buyers continue to buy land off the plan as much as 12+ months from completion with a 10% deposit and unconditional contract – then I’m convinced the market remains fundamentally strong. It’s this underlying strength and continued demand for new dwellings that will see CFMG Capital continue to operate projects in the Melbourne market.
Andrew Thomson, General Manager – CFMG Capital
Andrew has worked in property development and financial services for the past 17 years and has sold or leased in excess of $3billion worth of property in various asset classes across Queensland, NSW, Victoria and South Australia.