Property prices across Australia have taken a hit since the onset of COVID-19, however the hit has been significantly less than initially feared. New data released shows house prices across the Greater Brisbane area dropped 1.4% in the three months leading up to June, according to Domain’s latest House Price Report. In Sydney prices dropped by 2% over the same period, while in Melbourne prices also dropped by 3.5%.
However, Australia’s residential property market held up well across the full financial year, outperforming shares. The total return from residential property (prices and rents) on a national basis was 11.7%, compared with a 7.2% fall in total returns from shares. While this is more of a holistic view, and isn’t specific to the new detached residential market, its also clear that the new development market is more immediately impacted by the movement of economic levers and government stimulus than more traditional residential real-estate markets. The suspension of open houses and auctions for a period did halt the market recovery somewhat, only Perth and Darwin experienced annual price falls as the table (Source: CoreLogic Home Value Index) shows. The two largest markets – Sydney and Melbourne metro – both posted double digit returns.
Despite the table showing relatively minor negative growth in the most recent quarter, across each of the CFMG Capital projects in both Queensland and Victoria, there has been no drop in sale prices and any negative growth has been absorbed in the established housing market, particularly in the inner rings of major capitals and in high density apartment living. In fact, at most Queensland projects developed by CFMG Capital there was pricing escalation in the quarter from April – June 2020 which was largely driven by high demand.
The only direct impact on CFMG Capital developed residential communities was a short period of reduced transactional activity, largely due to closed sales offices and the Stage 3 restriction periods across the country. In Queensland, sales rates have returned and surpassed pre-covid levels, while Victoria saw a spike in activity in June before the second wave has somewhat stifled activity in the short term.
The main goal of CFMG Capital is to acquire strategic residential development sites that meet a strict investment criteria and enable us to provide attractive investment opportunities to our loyal client base, in addition to generating an attractive return to CFMG Capital.
In order to achieve this, a consistent flow of new acquisitions is required, with the primary challenge being to ensure they meet the clearly defined investment criteria underpinning the CFMG Capital development business. This criteria is defined generally below:
Proximity to a major capital city;
Population growth and targeted local demographics;
Proximity to existing and proposed competing land estates;
Proximity to key planned infrastructure projects;
Employment opportunities within the area;
Lifestyle choices including schools, family security, transportation and recreation;
A forecast 20% development margin (before payment of fund management fees); and
Subject to the discretion of the Board with a purchase price equal to, or less than, an independent valuation.
Throughout the most recent period of economic uncertainty, CFMG Capital have taken a more conservative approach to site identification and acquisition than is normal, and have had a strong focus on opportunities with longer term settlement, smaller boutique opportunities located in premium infill locations and specifically sites adjacent to, or in the immediate vicinity of existing CFMG Capital communities.
By purchasing adjacent to, or in the immediate vicinity of existing projects – CFMG Capital are able to expand existing projects taking advantage of existing marketing, development and sales momentum, or in some cases replace completed projects to meet the demands of various sales networks.