PERTH property developers are building their exposure to the Melbourne market in a bid to offset an anaemic local market and capitalise on the strong population forecasts for the Victorian capital.
PERTH property developers are building their exposure to the Melbourne market in a bid to offset an anaemic local market and capitalise on the strong population forecasts for the Victorian capital.
Cedar Woods Properties revealed this week it had signed a major leasing deal with supermarket giant Woolworths for its Williams Landing project in Melbourne’s west.
The announcement came just days after Satterley Property Group cut the ribbon on its $230 million Coburg Hill development.
Peet’s investment in Melbourne’s residential sector dates back more than a decade, but this week it will unveil a series of new projects in Melbourne’s northern growth corridor.
Affordability is a key factor driving this investment and Satterley chief executive Nigel Satterley revealed he would like to see Victorian projects represent as much as 30 per cent of the company’s overall portfolio.
The group plans to acquire up to three new projects in the Melbourne market in the next three to six months.
If it completes these acquisitions, Melbourne projects would account for about 20 per cent of Satterley’s total portfolio.
Satterley paid $79 million for the Williams Landing site in October last year. The property formerly supported a Kodak factory and is only Satterley’s second Victorian project.
In stark contrast to the Perth market, Melbourne property prices have grown strongly in the past few years; but with construction costs as much as 40 per cent cheaper than in Perth, it has retained its affordability.
“Single-storey construction costs are about 20 to 25 per cent cheaper than in Perth and civil works are at least 25 per cent cheaper in Melbourne,” Mr Satterley said.
“And it’s a very stable market; we think the population growth there will be 75,000 to 80,000 people a year ... and the cost of living is about 25 per cent cheaper than in Perth.”
Cedar Woods has sold about 800 lots in its Williams Landing project and the first stage of its town centre is expected to open by 2013.
The development on former Defence land is 19 kilometres from Melbourne’s CBD and in close proximity to a planned new railway station.
Melbourne projects now account for about half of Cedar Wood’s total portfolio and managing director Paul Sadleir said the business had clearly benefited from that geographical diversification.
“The capital cities all move in different cycles and when one is up the other is down. We have certainly benefitted from a strong market in Melbourne when the Perth market has come off a bit,” he said.
“We still see a lot of resource growth here in WA and in Melbourne a lot of population growth.”
Cedar Woods recently announced an acquisition in Baldivis in WA and Mr Sadleir said it continued to run the ruler over projects in both WA and Victoria.
He said the shortage of development funding around the country was forcing some developers to sell holdings rather than take them through to completion.
“There are opportunities for those that are reasonably well capitalised and we have some spare capacity at the moment, so we are certainly looking at other things to add,” Mr Sadleir said.
“We have a good strong portfolio, particularly for the next five years, so the things we are buying are generally more medium term.”
