Mirvac punts on development

Property developer Mirvac is punting that apartment buyers will keep paying for inner city units despite a drop in immigration and slower sales.

Mirvac chief executive Susan Lloyd-Hurwitz said there had been “positive feedback” from the company’s customer base and the developer expected “strong demand from owner-occupiers. Picture: Jane Dempster/The Australian.

Property developer Mirvac is punting that apartment buyers will keep paying for inner city units despite a drop in immigration and slower sales as some lenders clamp down on the sector.

In a sign developers are more willing to launch projects, Mirvac has committed to a fresh inner-Sydney project, even as some oversupplied areas suffer high vacancies and price falls, with new apartment approvals also dropping.

Mirvac chief executive Susan Lloyd-Hurwitz said there had been “positive feedback” from the company’s customer base and the developer expected “strong demand from owner-occupiers, particularly people from the local area” as it launches in the crowded Green Square market.

The company’s land estates business is also firing.

Although prospective buyers are not yet camping out for lots, Mirvac is making the best of government stimulus packages, including selling terraces in its estates for about $800,000.

“Exchanges have been significantly up on this time last year; there is very strong demand,” Ms Lloyd-Hurwitz said.

The property chief said that even in locked-down Melbourne there had been consistent demand for land, though analysts have cautioned that government packages have effectively dragged forward sales, rather than unearthed new demand.

Mirvac is pushing the federal government for more stimulus for units and may also benefit from further state government relief.

“We have put forward our view that the HomeBuilder grant should have a longer lead time,” Ms Lloyd-Hurwitz said.

The company is also banking on a longer term switch to the suburbs and away from central business districts, where occupancy remains low and incentives to attract new tenants are soaring.

The company’s Green Square plans also include a large office building that should be complete by 2026. But lessons from the pandemic are prompting Mirvac, more than many office-only companies, to throw up alternatives to the CBD.

“The pandemic has taught us that people don’t necessarily want to commute to the CBD five days a week,” Ms Lloyd-Hurwitz said.

Mirvac had an open minded approach on returning to office, saying a “hub and spoke” model of accommodation could be used.

“This is a fantastic site where people can live and work in the same environment,” she said, dubbing the precinct a “good commercial environment” where the company could deliver high-quality alternatives to the CBD at a lower cost.

The Mirvac chief rejected simplistic calls to “return to the office” without regard to the alignment of business and staff needs and the potential for developers to come up with new styles of buildings.

“I think the phrase ‘back to work’ is completely misplaced, because we are all working very hard, just from different places,” Ms Lloyd-Hurwitz said. “We’ve always believed that, even before the pandemic’s flexible working arrangements, and we continue to provide for people to work and achieve their objectives in a whole range of different ways.” The developer has broken ground on the latest stage of its precinct in Green Square, where it is planning another 1150 units in coming years.

The move signals its confidence in a recovery. It has managed to keep defaults in check as it focuses on the owner-occupier market.

Mirvac is launching an initial 119 apartments to its customer base and is planning four stages of development, partly directed at local downsizers and, when it recovers, the Asian market.

Units in the just launched stage will be delivered in early 2024 and could serve as a test for the company’s longer-dated apartment projects including a redevelopment of the Harbourside Shopping Centre in Darling Harbour and a tower in the Sydney CBD.

Mirvac is making a major push into build-to-rent units and has ambitions of building a portfolio of 5000 units. Ms Lloyd-Hurwitz said that the emerging sector, which won’t feature at Green Square, was “absolutely part of the housing journey”.

The nascent sector has been slugged by falling rents but analysts say the Mirvac model of building, owning and renting out the apartments, with the backing of pension funds, is solid.

“We believe that people who rent should have access to high-quality, stable homes,” the Mirvac CEO said. “It will be part of the housing spectrum for this country going into the future.”