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Robert Gottliebsen

High-rise Harry’s glut-busting land diet

Robert Gottliebsen
Harry Triguboff walking through his latest project in Parramatta, the Altitude.
Harry Triguboff walking through his latest project in Parramatta, the Altitude.

A dramatic change is set to take place in the Sydney apartment land market and a similar trend is taking place in Melbourne, albeit for different reasons.

Apartment land prices in these two cities have skyrocketed in recent years — particularly in Sydney — driven by Chinese buying of off-the-plan apartments in both cities and, in Melbourne, extensive buying of land by Chinese developers. However, the availability of Chinese money has recently been cut back substantially.

Unlike Melbourne, one group — Harry Triguboff’s Meriton group — dominates Sydney’s inner city apartment developments.

And Harry Triguboff has decided to cut back on his longer-term output of apartments by substantially reducing his purchase of apartment land at current prices.

He believes that the increase in the price of land in Sydney is causing apartment prices to go so high that demand is being reduced or modified.

Triguboff says that in recent months he has watched more local and Chinese buyers take lower priced apartments when a larger unit would have suited them better. But those apartments were developed on much lower land prices. If Triguboff makes major purchaeses at today’s land prices, final apartment prcies will have to go much higher.

Triguboff’s Meriton has enough land to maintain apartment output at strong levels for about three years. In normal circumstances, over the next six months or so Triguboff would be out there buying land so it was available for developments in four and five years’ time.

But Triguboff fears that the apartments that would be produced from land at current Sydney levels will be priced out of the market. As a result, he is reducing his land purchases to a level that maintains sufficient output so that his core construction work force can continue to be employed.

Meriton can build apartments much cheaper than other developers because it has its own strong work force that is not retrenched after each development. So, continuation of work becomes important but, within that parameter, there is scope to significantly reduce his level of output.

Sydney apartment land is currently sourced in three main ways: via the owners of low yielding warehouses in inner Sydney, the land released by the New South Wales government’s Urban Growth Development Corporation and when owners of properties in a particular area bring their properties together to offer a worthwhile site.

These land owners will have to decide whether to meet the market or wait for boom prices to return. Along with apartments, Sydney land prices have been falling in recent months, but the declines are not large.

The apartment price has steadied. If the land prices fall, that will greatly increase Meriton’s ability to offer lower-priced apartments.

Meriton’s risk is that other developers will come in and take the land. But there are not many developers in Sydney that know how to find their way through the maze of state and local government approvals. But if the sellers do not come down and the land is left undeveloped, there will be a big shortage of Sydney apartments in four years’ time.

In Melbourne, the looming glut of one bedroom inner city apartments has depressed land prices but a bigger long-term factor has been the decision by the Victorian planning minister to reduce the number of apartments that can be built on a block of land via capping the height of buildings.

That has left developers who did not get permission to build apartments earlier, stuck with expensive land. As in Sydney, in four years when the Melbourne glut of small apartments has passed, the delays in development caused by the planning change may result in an apartment shortage, depending on the rate of migration.

Robert Gottliebsen
Robert GottliebsenBusiness Columnist

Robert Gottliebsen has spent more than 50 years writing and commentating about business and investment in Australia. He has won the Walkley award and Australian Journalist of the Year award. He has a place in the Australian Media Hall of Fame and in 2018 was awarded a Lifetime achievement award by the Melbourne Press Club. He received an Order of Australia Medal in 2018 for services to journalism and educational governance. He is a regular commentator for The Australian.

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Original URL: https://www.theaustralian.com.au/business/opinion/robert-gottliebsen/highrise-harrys-glutbusting-land-diet/news-story/b9d7bd6e822d9a2e89b30f9e9e1dd7b2