Property Prices Remain Stubborn


While property prices may have begun to drop in some cities as a result of rising costs of living, they remain extremely high compared with pre-pandemic levels.

The latest market analysis from PropTrack shows that national average house prices are just 1.66% below their peak of late 2021, after a 0.43% drop in July.
Despite that, dwelling values remain 33% above what they were in March 2020.

That increase was driven in part by the huge rise in regional cities where dwelling values are 49% higher than they were before Covid.

While the latest figures show drops in Sydney and Melbourne, which are both down 3% since the start of the year, other areas are still recording price growth.

In July Sydney dwelling values dropped by 0.4% and Melbourne dropped by 0.61%, while Brisbane and Darwin recorded no change.

Adelaide dwelling values increased by 0.4% in July, while Perth rose by 0.12% and Hobart increased by 0.26%.

August’2022 – Update from Landcom on Development of Cherrybrook Station Precinct

 

Written by: Angelo Lambropoulos (Director, Lambros Realty Pty Ltd)

On Monday 1st August at 1:00PM, I had a Zoom Meeting with four Landcom representatives to get a better understanding of the new proposal that has just been submitted for the Cherrybrook Station Precinct…

The four Landcom representatives were as follows: Adam Turnbull (Development Director); Samantha Mitchell (Development Manager); Rhana Flemming (Engagement Support); Georgia Keogh (Engagement Support). 

It’s important to note, that the NSW Department of Planning (DEP)  application is separate to that of Landcoms; however, both go hand-in-hand to help guide the development of the wider Cherrybrook precinct and inform future rezoning. The DEP’s plans for the greater Cherrybrook precint is as follows:

  • A green village with approx. 3,200 new homes. Buildings will be no higher than 5 storeys.
  • More than 2.3 hectares of new open space and protection of the Blue Gum High Forest, New streets will have at least 50% tree cover.
  • A new town centre based around the new metro station with about 390 new homes, a supermarket, cafes, a community facility, and open spaces (this is the Landcom specific proposal).
  • Most new homes in the precinct will be within 400m walk of 5 minutes’ walk of the metro station.
  • New pedestrian and cycling paths to make it easier to get around.

Please Note: I have provided the links to all of the technical reports toward the bottom of this blog, as well as a link to submit your feedback to the DEP should you wish to do so.

As I’m sure you are most probably already aware by now, Landcom has lodged a rezoning proposal for a new planning framework, which has been informed by a broad range of stakeholder and community feedback on the options for the precinct.

Landcom advised me, that the dominant feedback that they heard from stakeholders and community was as follows:

  • People valued the Blue Gum High Forest and the green, leafy look of Cherrybrook.
  • People wanted more cafes, restaurants and safe places for young people to meet, while others told Landcom they were happy to use the services at Epping and Castle Hill.
  • The provision of affordable housing for people such as teachers, nurses, disability and childcare workers, emergency workers, paramedics and police was a good idea.
  • People concerned about the impact on traffic congestion and parking.
  • People concerned about the capacity of schools in the area.
  • People opposed to building heights of up to eight storeys.

Angelo’s Question: How do you propose to keep housing affordable to combat supply and demand issues, AND what percentage of this proposal will be affordable housing?

Adam Turnbull responded: He clarified that Landcoms definition of affordable housing is ‘Affordable Rental Housing’ controlled by a Community Housing Provider (CHP), they are the ones that would control that aspect of it. There is a minimum requirement of 5% of the development for affordable housing.

Landcoms Rezoning Proposal includes:

Zoning

R4 High Density Residential – 5 storey limit, decreased from original 8-storey proposal. This is also reflected in the future place strategy in which the NSW Dept of Planning has put out for exhibition as well.

B4 Mixed Use – nonresidential use such as cafes, community facilities and perhaps a small supermarket. The exact make-up of that will depend on the future developer. Landcom are making sure they are being flexible in their zoning to allow for those kinds of spaces.

RE1 Public Recreation – the Blue Gum Forest, you can never develop on that land.

Floor Space Ratio (FSR)

This has changed as well; it has been reduced. The ratio is now 1.25:1 (north of Bradfield Parade), AND 1:1 (south of Bradfield Parade) – this is the side closest to the powerlines, where the carpark is.

Height

20.5m (on land zoned B4).

18.5m (on land zoned R4).

Existing height restrictions under current R2 zoning is 8.5m in case you were curious.

Other provisions

Min. 3,000sqm of public open space

Min 5% Affordable Housing.

Site-Specific Development Control Plan (Design Guide):

  • Building heights up to five storeys when viewed from Bradfield Parade.
  • Min 1,300 sqm GFA for community facility.
  • Sustainability targets (ie. Future planning, by being able to cater for the charging of electric vehicles, solar panel generation of electricity where possible and green star efficient ratings as touched on by Mr Adam Turnbull). This is essentially saying that this is the design that works, the developer must keep within these requirements. The design may not be exactly what’s produced in the future, but the main elements that we are looking to preserve and protect is all within that design guide.” – Adam Turnbull

Angelo’s Question: Are there any plans of putting the overhead power lines underground? Reason I ask, if there is going to be an apartment building built opposite the transmission tower, has there been any consideration given to just how difficult it would be to sell these apartments?

Adam Turnbull responded: Yes, that is something I’ve looked it. Ever since I saw the project I said, “let’s put them underground” – we did some investigations around 2016/17 about undergrounding them. Unfortunately, because of the ownership with most of the land under the lines being residential, the only way to underground them would be by taking the lines down Old Northern Rd and up Castle Hill Rd, and then still coming back out on the other side of Castle Hill Rd down toward West Pennant Hills, but the cost of that was insane. So basically, removing them is not an option. What we’ve done with that site being R4 and able to build up to the 5-storeys, is to keep the flexibility there, it doesn’t necessarily mean that’s what is going to be developed on the site, the R4 is a very flexible zone that pretty much allows you to do any type of residential in there. We do acknowledge that the powerlines will likely have an impact on the future development of that site.

Landcoms Reference Scheme Includes:

  • Buildings up to five storeys when viewed from Bradfield parade and the opportunity for an additional lower ground storey of retail and community floor space.
  • Around 390 new homes.
  • 1,300m2 of community space.
  • 3,200m2 of retail space.
  • More than 1 hectare of public open space.

Angelo’s Question: Given your market research, how strong was the need for a Library in this particular location?

Adam Turnbull responded: The library and the community facility that we’re putting into this proposal is really to cater for the broader precinct redevelopment, it’s not just what’s required for our redevelopment. The demand that came back for that from the broader precinct was around 1,300m2, and that has also been identified by Hornsby Council in their contributions plan that they did a few years ago, there was the identification of 500sqm of library floor space requirement. The layout and break up of that may change, that is something for the future.

Angelo’s Question: What is being done to improve carparking facilities?

Adam Turnbull responded: There will be carparking available as part of residential and non-residential uses, there will be basement carparking, which is located underneath the powerlines as part of this proposal. This is also in line with the Hornsby DCP, and the carparking requirement for the commercial spaces (retail areas). There is no intention to increase the size of the commuter carpark.

Angelo’s Question: What portion of the apartments will be 3, 2 and 1 Bedroom?

Adam Turnbull responded: At the moment this is just the concept, this is just the guide for the rezoning heights and density. Our assumption on 375 homes would focus on more of a generic mix, we generally apply more of a broad assumption when we’re doing the dwelling types. Really what we’re focusing on is the amount of floor area that’s available on the site.

Samantha Mitchell added: From memory, I believe a rough guide was 20% three bedrooms, 20% one bedroom, and 60% two bedrooms. There is a minimum in the design control guide that requires a minimum of 10% for each dwelling type, but the actual break up of that will really depend on the future developer.

Adam Turnbull added: What we’ve found on the sites we have had on the line stretching from Epping to Tallawong, is that generally the developers that acquire these sites are doing slightly larger apartments, more three bedrooms because of the market demand, and that would likely be the same here. We (Landcom) might say 390 dwellings, it could end up being 320, or it could very well be 390.

Angelo’s Question: How will local schools cope with growing population? 

Adam Turnbull responded: The NSW Dept of Planning have more around the strategy of school’s infrastructure, as do the Department of Education. For us, we’re not expecting the 390 new homes to have a major impact, but that broader 3,200 will.

Angelo’s Question: When will this site go to tender?

Adam Turnbull responded: The intention of the rezoning is to finalise it this year, it’s a very high priority within Government to finalise because it’s been going on for a long time. Once all that is finalised the intention will be to go to market, when that is will depend on demand and when that works out for us as well, but it’s probably going to be at some time in 2023.

… And there you have it. That summarises my 40 minute Zoom Meeting with Landcom on Monday. I hope this has helped provide a little more clarity on the development for you.

On a closing note, I would like to thank the Landcom team for taking time out of their day to speak with me. It’s also encouraging to know that when the site is placed up for tender, they are quite selective with who acquires the site, as Mr. Turnbull advised it’s their reputation on the line if it goes to an irreputable developer.

How you can have your say:

Landcom’s rezoning application is on public exhibition until 11:59pm, 28 August 2022.


Links to technical reports:

NSW Dept of Planning 

Landcom Proposal

Cherrybrook Station Precinct Map

SEPP Amendment

Cherrybrook 360 Virtual Engagement Room

Submit Your Feedback on Planning Proposal HERE


Macquarie Bank Cuts Variable Rate


Macquarie Bank cut its variable interest rate by up to 25 basis points just a few weeks after increasing it by 50 basis points.

Just a few days before the rate rise in July, Commonwealth Bank also cut its lowest variable rate by 0.15%, while ME Bank reduced some of its variable rates.

The rate drops appear to be a push for better market share, with many of the reduced variable rates being offered just for new customers.

Macquarie Bank, which has been trying to gain a bigger foothold in the market, dropped its variable rate on a number of loans for owner occupiers and investors.

The RBA is set to meet again next week with many predicting a further rate increase.

ANZ is predicting the official cash rate will be above 3% before the end of the year. It has tipped successive rate rises in August, September, October and November. However the Commonwealth Bank says the official rate will not go that high.

Govt Charges Deter Foreign Buyers


While Australia needs foreign investment to help power the economy, higher application fees for foreign investors are expected to deter them from buying here.

Property Council of Australia chief executive Ken Morrison says the July 29 doubling of foreign investor fees is not a solution to fix housing affordability issues in Australia.

“The Property Council supports moves to tackle the challenge of housing affordability and supply but increasing costs on and deterring investment in the creation of new housing works against this goal,” he says.

The fees vary depending on properties, but for example investors will now pay $13,200 for properties which are priced $1 million or less.

Morrison says all the fee increases do is make Australia seem hostile to outside investment.

“We should be welcoming foreign investment with open arms, not sending the opposite message by doubling these fees which are already much larger than our competitors and apply to far more transactions,” he says.

Increased Density Could Ease Prices


Allowing higher density development in Australia could help ease housing affordability issues, according to analysis of New Zealand planning changes.

Auckland “up-zoned” about three quarters of the city in 2016 in response to a housing affordability crisis. The changes allowed for the construction of townhouses, terraces and units within 20km of the CBD.

Research by the Cowles Foundation for Research in Economics at Yale University found that, as a result, Auckland has built an extra 26,903 homes in the past five years.

Report author Dr Ryan Greenaway-McGrevy says the success can be attributed in part to the almost blanket introduction of higher density development throughout the inner suburban area of Auckland.

“If cities are considering up-zoning they really need to shy away from only small, targeted areas that are permitted to build up and think about implementing the policy more broadly,” he says.

Brendan Coates of the Grattan Institute says these kinds of policies could lower the cost of housing in Australia by 12.5%.

Rising Migrants Lift Rental Searches


A return of migrants and international students is putting further strain on the rental market.

PropTrack’s Overseas Search Report reveals searches on realestate.com.au from overseas increased by 23% in June compared with the same time last year.

Rental searches accounted for 71% of the overseas activity during June, while 7% of searches were for properties for sale.

Searches from China jumped a massive 432% during June, India is up 197 %, and Hong Kong is up by 100%.

PropTrack economist Angus Moore believes the current increase in searching activity is from migrants and students, not expats.

“When we look at ABS data, we are starting to see migrants come back,” he says.

“It’s nowhere near what we were seeing prepandemic but there are signs it’s returning.

“If we think about the composition of temporary migrants in Australia, it’s largely students, working holidaymakers and, to some extent, temporary work visas. Most of those people are going to be looking for rentals.”

RBA Refutes Property Doomsayers


The Reserve Bank of Australia deputy governor has dismissed concerns that interest rate rises will have a negative impact on the housing market.

Michele Bullock says most households can handle a potential 3 percentage point increase in the cash rate.

This, she says, is because many borrowers are well ahead on their mortgage repayments, have significant savings and good equity in their homes.

Bullock says most borrowers had been assessed under very strict criteria in recent years to ensure they could afford any interest rate rises.

She says the current cash rate of 1.35% must go a “fair bit higher” for the economy to reach a balanced level, while RBA Governor Philip Lowe says that balanced or neutral rate is probably “at least” 2.5%.

Their comments come as Commonwealth Bank of Australia economist Gareth Aird and Coolabah Capital head Christopher Joye expressed concerns that higher rates will cause house price falls and lead to a reduction in household wealth. But Bullock disagrees.

Home Building 80% Above Pre-Covid Levels


Material cost blow-outs and a shortage of tradies hasn’t stemmed the demand for new homes, with the latest figures showing construction is still above pre-Covid levels even though building fell by 11% in the first quarter of 2022.

HIA Economist Tom Devitt says the recent slowing in commencements is not due to slowing demand.

“Home building activity in the first quarter of 2022 was held back by staff shortages associated with the Omicron outbreak and the higher than usual uptake of holiday leave,” he says.

Devitt says much of the demand is still as a result of builders working through the HomeBuilder grant pipeline.

“Despite the rise in completions and decline in commencement of new homes, the volume of detached work under construction is almost 80% above its pre-pandemic levels,” he says.

Construction of units is also doing well, up 1.8% in the March Quarter to be 30% higher compared with the previous year.

Rental Growth At Fastest Pace In 7yrs


Australia’s rental crisis is expected to worsen, with rents continuing to rise. PropTrack data suggests median rents are up 7% compared with the June 2021 Quarter.

That is the fastest pace of growth the market has experienced for seven years, with combined capital city house rents now averaging $500 per week and units $450. Rents in regional areas have hit $455 for houses and $395 for units.

PropTrack chief economist Cameron Kusher warns Australia is still at the start of the rental crisis.

“With overseas and interstate migration returning with borders now open, it seems likely that rental conditions will tighten further over the coming months,” he says.

Kusher says the total supply of rental properties is down 18% on a year ago.
Domain’s latest rent report shows both house and unit rents over the combined capitals have recorded their longest continuous stretch of rental price growth, with house rents rising for the fifth consecutive quarter and unit rents for the fourth.