Developer Tim Gurner warns of apartments shortage and COVID ‘rental crisis’

The Melbourne apartments developer says the top end of the market is holding up, but policies need to change or construction jobs will be lost.

Developer Tim Gurner is warning there will be a “rental crisis” should government ­ignore the construction sector in any post-COVID economic recovery plans. Picture: Stuart McEvoy

Tim Gurner warns there will be a “rental crisis” in a couple of years’ time during a housing shortage should government ­ignore the construction sector in any post-COVID economic recovery plans, and if what he says are unfair charges on developers and investors are not ­reversed.

Gurner has made his fortune from developing apartment sites dotted around Melbourne’s trendy inner-city suburbs, as well as Brisbane and Sydney.

He says a slowdown in projects during the pandemic could lead to unintended bad consequences.

While the market has slowed and sales are taking longer to settle, Gurner says many investors have at least recognised rents have not fallen as far as interest rates in the past two to three years, so renting out properties is still somewhat palatable.

But he believes that the removal of stamp duty concessions for investors buying new apartments off-the-plan by the Victorian government two years ago and other regulatory changes imposed by bodies such as APRA to curb investor lending will have knock-on effects when the population starts to grow.

“There will be a rental crisis. They need to get serious about this. And if they are serious about construction jobs — and you have to remember the sector accounts for about 46-47 per cent of the state government’s income — the only way they can do that is bring back foreign purchases and by allowing off-the-plan stamp duty exemptions back in,” Gurner tells The Australian.

“If you look forward beyond this period of time (when Melbourne is locked down due to the coronavirus), I think Australia will be seen to have dealt with this reasonably well and be viewed as a safe haven. So we will get good population growth then and we are going to get a very undersupplied market when that happens.

“They need to get some confidence in the market with their policies, for consumers and investors.”

Gurner, who founded his eponymous development company after selling his gym business at 19, sees a two-speed rental property market emerging during COVID-19.

“At the moment, it is not a great market but it is not devastatingly bad. It is challenging though and if you look at the areas being hammered in Melbourne it is where the Chinese and other international students have been. So the CBD and Southbank, for example. That will jump as soon as people are allowed back.

“But at our Spanish Club project (in inner-city Fitzroy) recently we had a 500m line down the road and 10 rental applications per apartment. That market is not reliant on international students, and it was highly contested with people bidding over each other for the rentals.”

Even so, Gurner says rents may have fallen by up to 20 per cent this year — though he hastens to add that his firm has successfully pointed out to buyers in some of their projects that with interest rates having fallen by more since they signed their contracts to buy off-the-plan up to two years ago, the investment equation is still a relatively good one.

For his firm’s Albert Place project in South Melbourne, Gurner says investors (who account for 30-40 per cent of the buyers of the 140 apartments) were sent rental estimates 5-6 per cent below original projections. “But we showed them that interest rates had come down 40 per cent in the same time, so they were ahead of where they were.”

Meanwhile, sales at Gurner’s $540m luxury St Moritz project currently under construction in St Kilda — comprised entirely, he says, of owner-occupiers — have been strong. In the past two weeks, two apartments have sold for more than $6.5m, one for $9.25m and another for $3.25m.

Pandemic notwithstanding, Gurner plans to launch sales for two Melbourne projects later this year but will delay another on Queens Parade in North ­Fitzroy.

Otherwise, he says he will have “a good crack” at buying vacant sites for new projects later in the year, and hopes to have about half of his projects in Melbourne, 30 per cent in Sydney and then the remainder in Brisbane and even potentially New Zealand in the future.

He also expects construction prices to fall. “It needs to correct to allow for what is happening. The big (builders) are finding it tougher as there isn’t enough work being tendered. When residential dropped off in 2018 they had hotels and student accommodation to get them through. That won’t happen now so they are going to have to meet the market and adjust their pricing.”