Chinese-backed developer JQZ pays $110m for prime Parramatta development site

The Chinese-backed group has snapped up a key site once spruiked as a $1bn development in Sydney’s west with plans approved for nearly 800 units and a hotel.

The planned South Quarter development site in Parramatta has been snapped by JQZ.

Chinese-backed developer JQZ has swooped on a key development site in Sydney’s western hub of Parramatta once spruiked as a $1bn development, with the sale for $110m showing the fall off in the value of apartment projects since the apartment boom.

The site was sold by Ellerson Property which was spun out of the Dyldam empire, which has been under pressure, as many city unit projects have struggled to get off the ground.

Dyldam picked up the former Auto Alley site eight years ago for about $150m when the apartment boom was raging and it was billed as being able to house a $1bn residential and commercial development.

Times have since been much tougher in apartment development as most Chinese players, including Dyldam’s backer Beijing Capital Land, headed for the exits, and a series of local players hit financial strife.

JQZ, meanwhile, made its name with large-scale projects across Sydney and will add the South Quarter project in Parramatta to its multi-billion dollar pipeline. The site carries approval for 773 units, offices and a hotel across five towers, which will become a feature of the increasingly crowded skyline in the western Sydney hub.

Colliers agents Matthew Meynell and James Cowan, CBRE‘s Ben Wicks and Alex Mirzain and Jeff Moxham of Moxham brokered the deal, which broke a relatively long drought of development site sales.

Apartment players have struggled to make their projects stack up in the face of high interest rates and the difficulty of obtaining enough pre-sales to get lending support. But the dramatic shortage of rental accommodation is helping to put a floor under the value of units as investors start to come back into the market.

Owner-occupiers are also increasingly on the hunt for flats as rental costs have soared. The deal also shows the relative absence of new build-to-sell apartment developers in key markets.

A brace of build to rent developers has proposed major towers in Parramatta, which will effectively see the market well supplied for renters in coming years. Big projects are underway by entrepreneur Tim Gurner and Daniel Grollo-backed Home, with Novus also developing a build-to-rent tower.

However, there is relatively little new stock coming out of the ground for the build-to-sell market.

ABS data released last week on new residential building approvals revealed a sobering outlook for the weakness in the housing supply pipeline.

Urban Development Institute of Australia NSW chief executive Steve Mann said that approvals in the state for new builds in the 12 months to February 2023 dropped below 50,000 for the first time since November 2020, marking a 20 per cent annual decline.

In the apartment market, annual approvals crashed to a 10-year low and have fallen from a peak in 2016 of close to half of all approvals in NSW to just one-fifth of approvals.

More renters in NSW are paying above 30 per cent of their income on rent than in any other Australian state. “With the apartment pipeline appearing to bottom out, there is no sign of a quick turnaround unless the new NSW Labor government acts now,” Mr Mann said.

Developers have struggled for presales in the apartment market due to rising interest rates, steep construction costs, and a strict tax system, which make it tough to get financing.

Some major players which have projects underway are winning sales partly as the rental crisis spurs home buyers into the market.

Private developer Deicorp has seen a jump in inquiries for off-the-plan apartments, particularly from first home buyers wanting to escape the rising costs of rentals in Sydney, this year.

Deicorp has seen inquiries for apartments, including recently completed new product, increase by nearly 13 per cent in the March quarter, with sales up by 28 per cent over the period. “We’re definitely noticing increased interest from buyers, including first home buyers, and these inquiries are converting to sales,” Deicorp executive manager, corporate communications, Rob Furolo said.

Mid-range units are in demand with luxury CBD towers also winning interest. “Across our portfolio, agents are seeing strong demand for apartments particularly in the $600,000 to $850,000 price point, but we’re also seeing sales at the upper end of the market with strong results at our luxury CBD project – Hyde Metropolitan being achieved,” he said.

Mr Furolo said that accelerating rental prices were also driving growing interest from investors who believe rental prices are likely to continue rising over the foreseeable future.