New Investment Opportunity to Meet the Booming House Demand
Since the onset of Covid-19, we have seen a prominent trend across Australian housing market – soaring demand for detached houses. This reflected in the widening price gap between house and unit prices. According to CoreLogic, the median Sydney house value has raised over 20.9% posted the highest annual growth in nearly 30 years and points to $1,224,613, compared to a median unit value of $794,193. This indicates a 54.2% gap between median house and unit prices, marking the highest on record.
Source: CoreLogic
Although home construction is at full capacity, there are not enough good properties in the market for sale to meet the extraordinary strong demand for houses in Sydney. New listings are absorbed very rapidly in the market according selling agents.
Bolstered by tight listings, surging demand, soaring house prices and low interest rates, the proportion of homes sold for a profit has surged to a decade-high level. According to CoreLogic, 91.5% per cent homes sold were profitable in June quarter. In Sydney, 97.6 per cent of houses were sold for a profit, marking the highest level in over 35 years.
Source: CoreLogic
The demand of large living space is set to endure. Working from home transformed the use and requirements of the Australians’ living space. Australians are placing greater value on the function, size and location of their dwellings in case similar disaster come. Strong demand for larger homes, with separate living and working areas, is set to endure post Covid and will have an influence on investment decisions and returns.
Larger living space are well in demand, but high prices of detached houses have caused affordability issues and moderate demand for detached houses, particularly in middle-ring suburb. Buyers thus turning their eyes to semidetached dwellings like duplex and townhouses. Australian Construction Industry Forum’s forecast reflect the trend. ACIF has added an additional $8.8 billion for housing construction forecast for 2021. From 2022 onwards, construction of semi-detached homes and townhouses will keep surging to meet the strong demand.
Our investment management team appreciate such demand in short to medium term and are actively exploring new opportunities to fund for land subdivision and housing construction projects in premium locations. Such projects are featured by following advantages -
1. Short term & quick turnover
Thanks to Complying Development Checklist (CDC) program - a combined planning and construction approval process which is designed to enable qualified development applications to be fast-tracked, the project cycle is expected to be 12 - 15 months. This means investment will see return in just a year. Besides, given the strong demand in current market and in short and medium term, the ending products will be very popular once release to the market. Compared to long term projects, short term means more efficiency in fund use and relevant lower risk with more certainty.
2. Diversification
One competitive advantage of investing in a pool of projects with different location and suburbs is that diversification can be easily achieved. People who want to purchase a piece of land and do land subdivision themselves will suffer more risks as their capital will locked in one or two projects. In addition, with multiple similar projects in pipeline, economic of scale can be easily achieved. This brings a lot of synergy among different projects which investors are hardly to achieve on their own. By achieving diversification and economic of scale, risk and costs could be largely reduced and enable investors to receive good return.
3. Attractive profit margin
Driving by limited listing, strong demand in larger living space and record low intertest rate, demand for semi-detached dwelling will maintain strong for short to medium terms and price for such products will stay at high level when our projects completed and release to the market, as we enter the market at the best booming stage of property cycle. Besides, the team will source the best off the market deal to ensure land cost at appropriate level; construction quality and costs will be monitored by internal project management team to ensure construction costs are within budget. All these management will ensure we deliver profitable projects with attractive profit margin.
4. Professional management
Projects will be managed by the experienced professionals in the industry. With more than 20 years’ experience in property developments and understanding and insights of property market and planning regulations, the team can source off-the market opportunities that meet strict investment and risk management requirements from well-established industry network and conduct rigorous due diligence with detailed analyses on each project to further minimize risk. Leveraging on in-house project marketing team, we are confident in landing the ending products to market and deliver attractive return to investors.
Learn more about our upcoming fund for land subdivision and housing construction projects
Being one of the fast movers in the industry, we are expecting to launch a preferred equity fund to fulfill the strong demand and catch up with market trend. Wharton has been working closely with developers specialized in land subdivision and house construction such as Castle Group and Norwest Developments. In the past few years, especially during covid, we have saw great success in funding for their projects in the most in-demand suburbs along Norwest Metro line and has delivered above average two digit return to our investors. If you want to learn more about investment opportunities of the upcoming fund for land subdivision and housing construction projects, please contact us info@whartoncapital.com.au.
REFERENCES
Sydney property: NSW Government missing new housing targets by 10,000 homes
High Land Prices will push people back
House price to income ratio continues to climb amid property boom and low wage growth
Sydney property owners making more profits on sale - CoreLogic Pain and Gain report
https://propertyupdate.com.au/corelogic-pain-and-gain-report-sydney/
Vendors’ confidence rises as lockdowns near end
Sydney property market forecast to grow strongly in 2021-2022
https://propertyupdate.com.au/property-investment-sydney/
The premium for houses over units has hit record highs – which capital city shows the biggest gap?
Price gap between Sydney houses and units blows out to a record
Sydney property market: House prices soar nearly 20 per cent over financial year