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Private equity and family office money circling brand new apartment residual stock acquisitions

Property Markets / Outlook

Australia

Dec 18 2018

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With institutional groups like Mirvac, and Grocon vying to get into the build-to-rent space driven by the Australian supply-demand fundamentals, high net worth family office investors and private equity groups are getting in on the opportunity. 


“We have 10million dwellings to house a population of 25million people, growing at c.250-350,000 people a year and a cap on new supply”. Says Simon Dahdah, Principal of Belle Property Surry Hills Commercial Division. 

 

“It’s logical that even though we have a dip in the residential market, driven by diminished availability of credit, values will bounce back fairly vigorously, the pressure from population growth will create an inevitable upward pressure on pricing.” Says Dahdah.

 

According to the AFR, a private investor has reportedly acquired 25 apartments at a discount of 20 per cent at Consolidated Properties' high-rise Spire development in the Brisbane CBD after the original buyers defaulted on settlement. Most of the original off-the-plan buyers were Chinese investors.

 

Other opportunistic high net worth investors such as Former Macquarie banker Andrew Hooper-Nguyen and his business partner, the co-founder of ASX-listed Excel Coal, Chris Ellis have been reported to be active in the space, specifically in Brisbane’s Fortitude Valley. Len Ainsworth, who’s wealth is estimated by the AFR to be c. $4b have reportedly acquired bulk residual stock in Brisbane at a significant discount to market.

 

“The deals we are working on are all off market in both Sydney and Brisbane. Both sectors are underpinned by strong rental demand - especially for high-quality, well located developments. Brisbane rental yields are roughly double those of Sydney”. Says Dahdah.

 

 

Australia’s population reached 25 million in August this year, significantly quicker than forecast by the ABS. NSW and QLD state government’s commitment to infrastructure spend of c. $85billion and c. $45billion respectively, and Victoria c. $14b, with the federal budget committing an additional $25b, all indications would suggest population growth will continue.

 

The NSW state government recently kyboshed the new planning regime for the western Sydney Corridor, which had slated 35,000 new homes as a result of political and local community pressure. 

 

Read more here: https://my-property-report.com/property-markets/outlook/complications-with-new-housing-supply-and-affordability-lead-to-build-to-rent-/1249552

 

“Planning has become very difficult in NSW and Victoria, which stems the flow of new supply. In addition, the lack of availability of credit does nothing to help move residual stock or affordability. Even though prices have come back by a blended c.6% across all of Sydney, the credit restrictions don’t mean that consumers can actually buy if they can’t get a loan”.   

 

“The strategy for the buyers we are working with is buy high quality, well-located product in bulk at a significant discount to hold until the market improves.” Says Dahdah. 

 

“It’s a win-win, developers are happy to have a confidential transaction to become more liquid and move onto their next project. The buyers see value in the compressed pricing offering with various exit or hold strategies depending on their financial modelling.” 

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