Richest 250 developers hail election as turning point

Source: The Australian

Australia’s richest and most successful property developers have declared the recent federal election as a turning point for the market, reporting renewed optimism and activity by home and apartment buyers and are pushing ahead with new projects.

Property dominates The List – Australia’s Richest 250, published by The Australian, contributing 68 members including billionaires Harry Triguboff and Lang Walker.

Combined the 68 are worth more than $85 billion and are responsible for the biggest housing projects around the country.

Mr Triguboff has flagged he will sell 30 apartments a week, up from five he was selling in January, at his giant Meriton and is scrapping a 10 per cent discount on his units.

Perth apartment developer Paul Blackburne said his high-end apartment group had experienced a “massive” increase in inquiries and sales since the election.

“The past 7 days has been our highest sales week in the past year. And we are looking to bring forward a number of projects as we expect the market to continue to improve [and] we are launching $300m of new projects in the next 12 months. This will create around 1000 new jobs and we are excited by the year ahead.”

Mr Blackburne told The Australian he expected his Blackburne Property Group’s upcoming $240 million Subiaco Pavilion Markets redevelopment to be mostly sold within three months of its public release.

He and other property magnates also hit out at regulators, saying cracked down too much on the industry and the coalition’s election victory coupled with the flagged lowering of the minimum interest rate serviceability buffer from 7 per cent meant action is heating up in the market from western Sydney to Queensland and Victoria and Western Australia.

Larry Kestelman, who is undertaking the $800m Capitol Grand project in Melbourne’s South Yarra, described the Australian Prudential Regulation Authority’s 7 per cent buffer requirement, in place to ensure a mortgage borrower could meet repayments at higher than current interest rates as “a big problem” because it had stopped people being able to access funds. APRA has flagged it would lift lending restrictions.

“I think a lot of people felt that we dodged a bullet with the election result. So there is renewed optimism out there.”

Sydney billionaire Shaun Bonett, the managing director of Precision Group, said authorities had reacted disproportionably to concerns about the property market overheating.

“There was an over-reaction by our regulators and the banks over the past two years, which was in a number of areas unnecessary and negatively impacted, particularly on small business. The Labour rhetoric of ‘taking from the rich’ with a higher tax regime and policy changes that would hurt investors was certainly cause for concern.”

Mr Kestelman said the slowdown could cause a lack of apartment supply in 2020 and beyond with developers having been reluctant to launch projects, which can take 18 months to two years to build, pending the election result.

“Developers have not been borrowing to launch in big volumes because of the banks and the general uncertainty. So that will feed though and I really think you will have a shortage of apartments on the market next year, which will be an issue. Particularly in the CBD and surrounds.”

Melbourne property developer Tim Gurner warned though that the market did not necessarily need interest rates to fall as it would demonstrate a weakness” in the economy.

“Anyone borrowing or trying to purchase a property today isn’t seeking lower interest rates, their big issue is finance approval. Until APRA and the banks loosen the credit restrictions and serviceability criteria, we will see very little actual improvement in the market.

“People are really struggling to obtain finance so until those restrictions are lifted and money starts to flow into the system again, the slight rise in sentiment since the Liberals were returned to office will lack any significant impact in the short term.”

But Western Sydney residential developer identity Arnold Vitocco said the election result had been “bloody terrific for us,” and that the amount of buyers looking at residential lots in Sydney’s southwest had “trebled”, while Queensland property doyen Kevin Seymour said “you can certainly sense a lot more confidence out there in the market. All the real estate agents, even prospective purchasers, are lot more buoyant now.”

Mr Seymour has spent a record amount on a display suite for a 39-apartment boutique project at trendy inner-city New Farm in Brisbane, which his eponymous family business will officially launch this weekend.

“We’ve spent $1.5m on the display centre, which is a record for Queensland. So we have a lot of confidence in the future of the market here now. We’re having an official launch on the weekend and we’ve got 70 agents coming along to. So there’s a lot of interest.”

When asked how many agents he thought would have turned up had Labor won the election, Mr Seymour said with a laugh: “Oh, probably about 10”.

Mr Vitocco, who co-owns the huge Narellan Town Centre with Tony Perich and his billionaire family, said he sold two lots on two of his big subdivisions last weekend.

That might not sound like too much, but we hardly sold one lot in the previous six months.

“It was the same for my partner at Oran Park, Tony Perich and his family, as well. They experienced the same thing. There’s suddenly a bit more activity in the market and I think you’ll find that optimism is back.

“We have people who are moving upwards. They came from Liverpool, Campbelltown and the like. They might sell their house for $800,000 there but they can buy a better one with us and then pocket the $100,000 difference. There’s no doubt the green shoots are there already for what could be a terrific 2020.”

Tony Denny, who made his fortune selling used cars in Europe before settling on the NSW central coast four years ago, said his Central Real development and construction business had also experienced an upturn.

“Our Peninsula project of three luxury towers at Point Frederick is a good example. We have had a really large increase in leads [from prospective buyers] since the election. We were probably getting two to three leads per day before then, but now we’re suddenly getting 20-30. So that optimism has really recovered.

“At least 80 per cent of the apartments will have water views and it is just as good as what people would pay $2.5m for on the Upper North Shore, but they might pay $1.5m here. So we think we will get some buyers from down there sell and come here.”