Developers find it harder to shift off-the-plan apartments amid rate hikes

Some of Australia’s largest residential developers say it has become more difficult to shift off-the-plan apartments, even as rents begin to rise considerably.

Some of the country’s largest residential developers – Meriton, Mirvac and Stockland – say it has become more difficult to shift off-the-plan apartments even as rents begin to rise considerably.

Meriton managing director Harry Triguboff told The Australian rents were rising on a weekly basis, but it was difficult to sell off-the-plan units.

In Surfers Paradise, apartment prices are falling about 5 per cent, but developers note that in the bullish years preceding 2022 developers had made money.

At Mirvac, home sales in the September quarter ran at less than half the levels of last year. The developer sold just 415 lots in the three months to September 20, well down on the 902 lots it sold at the same time last year. The slowdown is in line with rival housing developer Stockland, which also had lower sales in its housing estates as lower consumer sentiment weighed on its operations.

Andrew Antonas, managing director of Sydney’s Matrix Property, which specialises in selling commercial apartment sites to developers, says builders are worried about the future.

“We are going into a long period of two years of no significant price gains and no price falls. It will be a static market for two years,” he said. “There’s financial stress on off-the-plan developments, and construction prices have gone up 40 per cent.”

Woodhill Estate Agents principal Peter Chittenden. Picture: Britta Campion

Brad Caldwell-Eyles, CEO of 1st City Projects in Sydney’s east, says his agency’s 2021 revenue equalled that of 2017, 2018 and 2019 combined. “We are tracking to do 60 per cent of what we did in 2021, which was exceptional. You can’t have blowout years forever,” he said.

Mr Caldwell-Eyles says the downsizer market has put the brakes on, and it’s tough selling the $4m-$8m range. He says commission-only agents are more likely to retain their jobs, but it’s the support staff who might be let go as the market softens. But he has not heard of any redundancies yet: “We are getting inquiries, but (sales) conversion is tougher. Lead time to deals are longer.’’

South of Sydney, Berry-based Peter Chittenden, principal of Woodhill Estate Agents, says inquiry are still coming in. Like Meriton boss Mr Triguboff, Mr Chittenden said rents were increasing, adding that while there was less stock, pre-sales were not there to the level of 12 months ago.

“There’s good property in the market, inquiry is still there, it’s more inquisitive than performing,” he said.

In Melbourne, Kay & Burton chairman Gerald Delany said volumes were not as high, but there was a reasonable amount of houses and apartments coming on in the Stonnington region. “I have not seen any agents being let go … we would take anybody on who was any good. (But) we are not actively seeking staff,” Mr Delany said.