The Importance of Strategy with Asset Selection

Andrew Thomson - General Manager

CFMG Capital's development pipeline of more than 1,000 lots across seven different projects has provided a stable platform for growth.  The key to this success is working to a clearly defined strategy with asset selection.

CMFG Capital adopt a three tiered selection criteria which has enabled us to capitalise on the ongoing demand for residential land across various markets.

Andrew Thomson - General Manager

The importance with asset selection and with identifying appropriate land for development was highlighted in an article published by Domain earlier this year, which noted that the property industry fears a shortage of land on the Gold Coast could stall one of the fastest growing economies and property markets in the State.

It was noted that while there are large tracts of unimproved land on the Gold Coast, most of it isn’t really suitable for residential land development. It’s not as simple as vacant land being available and is therefore ready to be developed - there are a number of other factors that make vacant land suitable for residential development. To review a full copy of the article, click here.

The key characteristics which CFMG Capital take into account when identifying suitable projects include:

  • Proximity to a capital city;

  • Population growth and demographics of the locality;

  • Transportation options;

  • Employment options;

  • Lifestyle choices including schools, family security, transportation and recreation;

  • Topography of the land and ability to deliver key service infrastructure

  • Prevailing market conditions

Another key focus for CFMG Capital is to assess the geographic locations and States within Australia which have the appropriate fundamentals for growth.

CFMG Capital are currently operating seven separate projects – six in Queensland and one in Victoria and delivering its active investor base a fixed 12 per cent annual return via its CFMG Land & Opportunity Fund.

The CFMG Land and Opportunity Fund’s 12 per cent return (net of fees) is considered attractive compared to other asset classes. Residential investment property returned 8.1 per cent annually over the 10 years to December 2016, the 2017 ASX/Russell Investments Long-Term Investing Report shows.

Australian shares returned 4.3 per cent annually over this period, Australian listed property had a zero return and cash returned 2.8 per cent.

This performance requires CFMG Capital to be across all markets and economic fundamentals which have the potential to impact on future cycles.

Notwithstanding that capital cities have outperformed the regional market on average, Sydney’s widely reported unaffordability issues are starting to strengthen the case for ongoing growth in surrounding regional areas like Newcastle, Southern Highlands and Illawarra. Meanwhile in Melbourne, there has been unprecedented growth in residential land values over the last 36 months on the back of strong population growth with demand outstripping supply. These conditions are now starting to slow as land availability increases and demand pressures have reduced somewhat.

As a result of these boom cycles in both Sydney and Melbourne, the price disparity between the Sydney and Melbourne markets compared to Brisbane has reached historically high levels similar to 2003 and the Brisbane market is now experiencing growth in land values due to a combination of population growth, jobs growth, supply pressures and the natural attractiveness of more affordable housing product in general compared to the other two major capital cities.

With an investor base of in excess of 800 repeat investors, CFMG Capital have two current offers in the market through the CFMG Land & Opportunity fund. To find out more, click here to book in a time to speak with an investment consultant.

Andrew Thomson
General Manager, CFMG Capital

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