Positive Signs for Property Development?

source: ABS/Property Observer









Melbourne Property Watch

Here’s some information on the current economy that seems to support that now might be just the right time for property development and property investment.

Economics is another fairly complex animal to understand, and all credit to economists and market researchers as their job to interpret all these market forces and make correct trend predictions is truly master-class. Having some understanding of market forces can be beneficial in terms of property development and investment because timing in property can sometimes be an advantage.

The data is suggesting that although new home sales are stronger than they were a year ago, the new housing start figures are ‘subdued’. While that does point to some negatives, the net positive in capital expenditure is still a positive for the anticipated GDP trend and economy overall. The outlook for property price growth is positive and there doesn’t appear to be any upwards pressure on interest rates.

What I’d like to draw from this information is some potential advantages the passive property developer  could make the most of right now.

  • Lower equity and development costs – The data suggests to me that competition amongst builders and construction contractors is still pretty good, and this coupled with low interest rates will help keep property development costs lower in the short term, and relatively less equity to source.
  • Higher selling prices and increased saleability – a continued price growth trend is likely to improve your total revenue, and if there is no upward pressure on interest rates in the near future, more potential buyers are likely to meet mortgage serviceability requirements.

The bottom line is that your Melbourne property development project is more likely to be more profitable sooner rather than later, taking advantage of what appears to be another transition from a ‘buyers’ market to a ‘sellers’ market as our economy grows through the next cycle.

Furthermore, if you choose the develop and hold approach with a built form project, not only can you start with a better rental yield due to the savings you make on the unit(s) you hold, but rental demand is likely to increase as more are choosing to rent rather than buy, and the signs for positive capital growth look positive, meaning even better effective return on your hard earned cash.

So before you decide to put your property on the market or commit to buying an investment property, give us a call on 0438 028 194 or email domenic@landeq.com.au and we can help you assess & establish a clearer picture of the property development and investment strategies available to you.