Hike prices or go bust: developer
‘Perfect storm’ on unit front
PROPERTY developers will be forced to hike new apartment prices by at least 20 per cent thanks to a perfect storm of bad weather, sky-high petrol prices and increased labour and building costs, billionaire apartment mogul Harry Triguboff has warned.
The Meriton founder said that unless developers of apartment towers of more than 100 units raise prices they will either go broke or be unable to build.
“Our costs have gone up, and it’s a bottleneck; everybody wants the goods, and there’s delays everywhere,” said Mr Triguboff, adding that developers are still buying sites but not settling their acquisitions as they can’t secure council planning approvals in sufficient time frames.
Mr Triguboff said Meriton was confident of the residential market and would continue to build apartments.
“If temporarily the prices are too low, we are happy to lease the apartments,” he said.
Developer Tim Gurner, whose eponymous firm has plans for a $1.75bn development on the Gold Coast also believes construction costs are becoming unrealistic and causing project delays.
“I think the trades have had a huge amount of tenders come up over the past 12 months that will now not get built (because of the rising costs) and that the future work pipeline has now dried up. So they soon will be very keen for work again and be more competitive in their pricing, which is needed.”
But Mr Gurner believes Australia is about to see “the biggest residential property boom in my time”.
Interest rates are rising, inflation is biting and there is a general consensus among some of the biggest names in Australian property that house prices are likely to fall 10-15 per cent by the end of the year.
After that, Mr Gurner and some of his peers expect a combination of lack of newly built stock and rising demand from buyers as migration numbers increase to bring the good times for the sector back.
Property doyen Max Beck, a veteran of the credit crunch of the 1970s, says as “the tide goes out” more construction firms could fail and developers who have bought building sites with large amounts of debt could struggle to afford to hold on to their portfolios. Projects will be delayed, apartments and houses will take longer to sell than in previous years. Yet in the absence of higher unemployment numbers, Mr Beck believes the fundamentals of the property market remain strong. Demand for dwellings will start outstripping supply.
Mr Gurner also noted that the rental market is strong.
“Rental growth has never been better in my career than now,” he said. “Rents are going up 10-20 per cent and that covers that problem of rising interest rates (for investors). This is not immigration that has created a (rental) boom, it is a genuine domestic boom. And when the borders reopen properly and more people come here, there will be an ever bigger boom.”