PROJECT ADVICE HORIZONS NORTH

Transcription

1 PROJECT ADVICE HORIZONS NORTH

2 Project overview Matusik Property Insights has been engaged to provide advice on the new land subdivision to be called Horizons North, off Taintons Road, Woombye. Report coverage This report covers the Sunshine Coast Regional Council area. The project name, Horizons North, is based on a key feature of the site, being the northerly aspect provided across the majority of the land. The site also rises from a gully to a ridge line. Many of the allotments will have mid-to-long range views. The overall grade across the site will be around 7%. The estate, overall, will contain 95 allotments. The minimum lot size is 800m², which provides the opportunity for significant outdoor living areas on the individual lots. This is a major point of difference when compared to other land estates on the Sunshine Coast. Horizons North It also covers the Woombye Area. This is technically referred to as the ABS SA2 areas of Nambour and Palmwoods. Most allotments have also a north-south orientation. Lot widths are also wide, generally ranging from 22m to 26m and averaging 24m. Again, this is rare now on the Sunshine Coast. The soil on site provides good quality fill. The project should have the necessary council approvals to enter the market during the first half of calendar Horizons North PROJECT OVERVIEW 2

3 Project Advice Overall Great opportunity. Potential strengths outweigh weaknesses. Limited threats. Local pent-up demand for new land and house/land packages. Pricing Within each stage, allotment pricing is dependent on size, orientation and location. These price ranges are as at March 2016 and act as a guide only. Stage 1 $285,000 to $305,000 Stage 2 $310,000 to $335,000 Stage 3 $285,000 to $385,000 Stage 4a $285,000 to $425,000 Stage 4b $265,000 to $305,000 Rate of sale With the appropriate marketing campaign/budget and experienced sales agency engaged, land sales of between eight (8) and ten (10) per month are possible. This assumes a targeted builder sales campaign. Such a sales rate would need to attract a 9% share of the Sunshine Coast land market. A more realistic penetration rate would be 5%, thereby, delivering about one sale per week. Buyer origins About half of the buyers will most likely be Sunshine Coast residents; the rest are likely to reside in Brisbane (40%) or elsewhere in Queensland. Only limited interstate interest (say 5%, but maybe up to 10%). Buyer profile We expect that most land buyers (70%+) will be intending owner-residents. Investors will be looking for a rental yield rather than capital growth. Some will look to live in this investment home themselves in the future. Renters will be looking for affordable rent. Dual living homes will be attractive to renters and should provide a high gross rental return to investors. Two out of five sales should be made to builders. However, this could be more, given the rise in speculative builder demand on the Sunshine Coast over the past 12 months. Project direction All large allotments. North-south orientation. Mid-to-long range views. Flat building sites. Slab on ground construction. Family target market. Encourage dual living homes rather than expensive duplex lot arrangements. Allow builders free choice as to which allotments support dual living. But spread this choice across all stages and limit the number to around a third of the estate. Build a small housing display holding three homes, showcasing a dual living house; a standard house package and, if possible, an Endeavour home. This may be best built on lots 57, 58 and 59. Control the built form on lots 6, 7, 57, 58, 59 and 90. PROJECT ADVICE 3

4 Sunshine Coast land market Sunshine Coast residential market is in a recovery. Land sales are also improving, with close to 2,000 settled sales over the last twelve months. Land prices are increasing, too. Yet, average land size is in rapid decline. The average new allotment is now less than 500m². Just 3% of the new allotment supply is sized between what many think of as a traditional allotment i.e. between 800m² and 1,000m². Whilst most of the Coast s new land supply (80%) in terms of overall development is held in small infill projects (most under ten allotments in total), it is the larger land projects over 50 allotments in each development which dominate sales. On average, these larger estates attract four out of five land sales on the Sunshine Coast. Last year, these estates attracted close to 15 land sales each per calendar month. Future land supply is tightly held on the Sunshine Coast and just a third (36%) of the potential land supply currently has operational works approval. This equates to about 2,600 allotments. The Sunshine Coast is facing a shortage of deliverable new land supply, especially if current sales volumes continue; more so if sales volumes rise. Land sale activity is also geographically concentrated on the Sunshine Coast, with two locations Caloundra West and Mountain Creek holding a 50% market share. The Woombye area currently accounts for just 5% of the land sales on the Sunshine Coast. The Sunshine Coast has two distinct urban land markets one internal and the other coastal. Most urban allotments inland attract prices between $225,000 and $250,000. Most of these allotments are under 600m², these days. Similarly sized allotments closer to the coast attract prices between $350,000 and $400,000. There is some sales evidence that new inland allotments, sized between 800m² and 1,000m², will attract prices over $250,000. However, most of this land is of limited quality and is scattered across smaller infill parcels. In addition, most are sold via local brokerage agents and have spent little on marketing. Yet, there is considerable evidence that new allotments are now achieving prices over $300,000 per lot. An analysis of last year s dry land sales under 1,000m² across the Sunshine Coast found an average price of $330,000. The average size of these allotments was just 565m². Many were located in estates and positions inferior to what is proposed at Horizons North. Two out of five purchasers of land on the Sunshine Coast are locals; close to 60% live elsewhere in particular in Brisbane, or in other parts of the state. Two in five land buyers last year were builders. KEY FINDINGS 4

5 Local market parameters The Woombye area is growing by around 500 new residents per annum. There is a need to build about 225 new homes in the area each year. This need is forecast to rise to 325 new dwellings per annum over the next decade. The local area is undersupplied with new housing stock. The average rent for an older house in the Woombye area is now $450 per week. New three and four-bedroom detached homes in the area are attracting rents over $650 per week. Car ownership given the Woombye location is high, with most households owning two or more cars. The underlying demand for new homes in the local area is projected to increase in coming years. Population growth is expected to lift by 50%, as is the need for more new homes. Much of this lift in demand is likely to come from two sources firstly, the rental market and assuming the right new housing product can be supplied, secondly, larger families as owner residents. The future rental market is likely to be families, too, as well as older residents. Already families with children living at home (couples and single parents) make up just 40% of the local population. There is a latent demand for more compact housing in the area. At present, the local rental market is extremely tight with the vacancy rate in both local postcodes (4559 and 4560) being under 0.5%. Local rents have risen substantially over the last twelve months, with the largest increases being for two and three bedroom houses, rather than the traditional four-bedroom stock. KEY FINDINGS 5

6 Strengths Sunshine Coast s position in property cycle recovery phase Major project master planned estate, with parkland setting and mid-to-long range views Large allotments with generous frontages North-south orientation of most allotments Flat allotments allowing slab construction methods Undulating site with high soil quality Tight local supply of both existing stock and new housing supply Tight new detached housing supply especially of traditional sized allotments across the Sunshine Coast Pricing, if most allotments are priced between $285,000 and $325,000 Opportunity First half of calendar 2016 start date Falling interest rates and limited stock on the market Local underbuilding, so potentially local pent-up demand Builder business partner so some home building can start quickly Small home builder display Sell a high proportion (say 40%, maybe 50%) of allotments to other builders Local demographic mix introduce either duplex, or much better still, dual living homes on the same allotment, but limit to a third of the estate Limited new land development proposals in local area Housing design (given north-south allotment orientation)to greatly reduce/cover occupiers energy usage/bills Weaknesses Location away from the coast and from emerging major employment hub/s Large project need for experienced project marketing and non-local selling Threats Nationally, rising unemployment and slowing economy Pending Queensland and Federal elections both increasingly likely between May and July 2016 Limited proposed local infrastructure spending Actually overpricing the land or not meeting builder terms Using local real estate agents (with limited marketing budget) to spearhead the project s marketing/selling campaign SWOT ANALYSIS 6

7 Sunshine Coast Land sales market Calendar Years Settled land sales Median land price Average price/m² Sales/month by project * ,650 $250,000 $ $251,000 $ $231,000 $ ,300 $233,000 $ ,895 $245,000 $ ,953 $279,000 $ Source: Matusik database and Queensland State Government. Sunshine Coast Regional Council. *Average number of land based sales by major land project (i.e. over 50 allotments per project). Sunshine Coast Land based approvals Calendar Years Lots under 2,500/m² % total approvals Average new lot size (m²) % 800m2 to 1,000m ,365 69% % ,123 68% 600 8% % 535 5% % 525 8% ,224 62% 480 4% ,781 65% 478 3% Source: Matusik database and Queensland State Government. Sunshine Coast Regional Council. SUPPORTING INFORMATION 7

8 Sunshine Coast Vacant allotment approvals (2015) Allotment size Number % Under 350m² 172 9% 350m² to 450m² % 450m² to 600m² % 600m² to 800m² % 800m² to 1,000m² 65 3% 1,000m² to 2,500m² 77 4% Over 2,500m² 162 8% Total 1, % Source: Matusik database and Queensland State Government. Sunshine Coast Regional Council. Sunshine Coast Land sales by price group (2015) Price range Number reported sold % Under $250, % $250,000 to $300, % $300,000 to $350, % $350,000 to $400, % Over $400, % Total 1, % Source: Matusik database and RP Data. Sunshine Coast Regional Council. SUPPORTING INFORMATION 8

9 Sunshine Coast Settled dry lot land sales under 1,000m² (2015) Suburb Average price Average lot size (m²) Average $/m² land Bli Bli $296, $438 Coolum Beach $319, $424 Forest Glen $294, $445 Maroochydore $342, $983 Mountain Creek $333, $700 Mudjimba $348, $526 Peregian Springs $377, $539 Yaroomba $324, $455 Birtinya $338, $914 Caloundra West $327, $521 Meriden Plains $336, $568 Pelican Waters $318, $525 Average $330, $584 Source: Matusik database and RP Data. Sunshine Coast Regional Council. Sunshine Coast Land buyer origins and builder interest (2015) Buyer origin Number reported sold % Sunshine Coast % Brisbane region % Other Queensland % New South Wales 156 8% Other Interstate 59 3% Overseas 20 1% Total 1, % Builder % Source: Matusik database and RP Data. Sunshine Coast Regional Council. SUPPORTING INFORMATION 9

10 Woombye Area Past population growth and underlying demand Financial Years Estimated population Annual change % growth Housing demand (pa) , % , % , % , % , % 230 Average (last five years) Source: Matusik database and ABS. ABS SA2 areas of Nambour and Palmwoods. Woombye Area Recent underlying housing need and new housing supply Financial Years Housing demand (pa) New housing starts Cumulative difference % undersupplied % % % % % Total 1, % Source: Matusik database and ABS. ABS SA2 areas of Nambour and Palmwoods. SUPPORTING INFORMATION 10

11 Woombye Area Projected population growth and underlying demand Financial Years Estimated population Annual change % growth Housing demand (pa) , % , % , % , % 370 Average (next ten years) Source: Matusik database and ABS. ABS SA2 areas of Nambour and Palmwoods. Woombye Area Selected housing demographics Indicators % total Household composition Couples with children at home 30% Couples with no children at home 30% One parent families 12% Lone person households 23% Group households 3% Other household type 2% Household tenure Fully owned 31% Mortgage 42% Rented 27% Car ownership per household No cars 7% One car 35% Two cars 38% Three cars+ 20% Source: Matusik database and ABS. ABS SA2 areas of Nambour and Palmwoods. SUPPORTING INFORMATION 11

12 Risks of investing in property Direct investment in residential property, like all investments, involves a number of risks. If these eventuate, your income might be lower than expected. There may even be none. In addition, the capital value of your investment could fall. The key risks of investing in property are outlined below: The property purchased may not provide the income or capital gains the asset was expected to produce. There is a risk that your property may, for periods of time, lie vacant and hence not generate income. Maintenance and repair costs are the investor s responsibility and can vary, and at times be significant. Such costs are sometimes recoverable from rental bonds or under insurance policies. There are a number of factors that affect the general property market including increases in supply and falls in demand; the cyclical nature of property values; increases in taxes and operating expenses; overall economic conditions; demographic changes; changes in town planning laws; casualty and condemnation losses; environmental risks; regulation on rents; detrimental new developments in the area; increases in interest rates; similarly, inflation and changes to bank funding policies. Gearing increases the volatility in the value of your investment. In the early stages of residential investment, a significant fall in the property s value may see balances fall to less than the total amount of borrowings. Increases in interest rates often increase the cost of borrowings. Changes in laws or their interpretations including taxation, superannuation and corporate regulatory laws, practice and policy could have an impact on your investment. You should seek professional tax advice before investing in residential property. Published by Matusik Property Insights Pty Ltd. Report date 6 th April Disclaimer This report has been prepared by Matusik Property Insights Pty Ltd. This content has been prepared without taking into account the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual s objectives, financial situation and needs, and if necessary, seek appropriate professional advice. Information herein includes material obtained from third parties considered to be accurate. Whilst this information has been carefully compiled, no warranty or promise as to its correctness is made or intended. Interested parties should undertake independent inquiries and investigations to satisfy themselves that any details herein are true and correct. In addition, no forecasts are being made about an individual s potential capital gains or rental returns. Matusik Property Insights Pty Ltd disclaims all liability for any loss or damage suffered by any person of, or in connection with, the provision of information herewith, or the purported reliance thereon by any person. Copyright + trademarks Reprinting, republication or distribution of any portion of this document is strictly prohibited. Financial penalties apply for any unauthorised reuse. Contact us for our reuse terms. Seven Reasons Why, Property Pick, Ten Things You Need To Know About, Property Rationale and Short Black Property Reports are trademarks of Matusik Property Insights Pty Ltd. Registered copyright nos , and Registration pending on Property Rationale and Short Black Property Reports. All rights reserved. Typical data sources MPI; Qld Government; Qld RTA; REIA; REIQ; SQM Research; BCI Australia: ABS; realestate.com and RPData. IMPORTANT NOTES 12