Development Site & Commercial Property Update | Q2 2022
The Metropolitan Sydney residential property market saw continuous growth throughout 2021 and Q1 of 2022, resulting from mortgage rates hitting record lows, widespread Government infrastructure investment, Government subsidies and grants. Whilst this did not translate to a notable increase in values of development sites, we have noticed a significant increase in purchaser enquiry.
The construction sector continues to be put under significant cost pressures due to increased regulation, liability extension onto consultants and limited pre-sale activity in suburban markets driving the cost of construction debt.
Despite rising costs and uncertainty, purchaser demand remained strong due to the limited supply of quality sites across Sydney and healthy balance sheets of many small to medium developers.
With a recent change in government and rising interest rates, we expect purchaser activity to shift and enquiry levels to cool approaching Q3. We have found during recent transactions that developers are restructuring or re-positioning deals to compensate for the risk, sell down period and arduous construction certificate requirement restrictions.
We expect going forward demand for tenanted commercial investments and established blocks of apartments to remain steady, due to the safety and security they provide, driven by increased rents across metropolitan Sydney, following rent reductions throughout COVID-19.