26/05/2022 - 09:41

Patient capital wins in hamlets’ long play

26/05/2022 - 09:41

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Small developers have been the winners as property buyers seek space in the deep South West.

Patient capital wins in hamlets’ long play
Cape Leeuwin, where the Southern and Indian oceans meet. Photo: Tourism Western Australia

Inspiring a location as it may be, sitting at the place where two great oceans meet, the state’s southwestern tip has been largely absent when it comes to the population and economic growth that has driven the property sector in the key centres to its north.

Where Margaret River has thrived on its wineries and surf, Dunsborough has become a significant suburban enclave and Busselton has established itself as a key regional service centre, Augusta (summer holiday homes aside) has generally struggled to attract residential development beyond its hardy, established population.

But there are some key signs this is changing.

Just as the regions to its north have benefited from the dramatic demographic shifts being pushed by responses to the pandemic, so too are the postcodes that dot the southern end of the Bussell Highway on the way to Cape Leeuwin.

Land sales in the hamlets of Witchcliffe, Karridale and Kudardup in recent years have, or will, add hundreds of residents to places that were little more than a pit stop and a petrol station on the route to Cape Leeuwin.

A motley collection of small, private land developers has found a return on capital, in most cases very patient money, as post-pandemic desire for a rural lifestyle accelerated progress on a long-term plan for the area as laid out in various strategic documents by the Shire of Augusta-Margaret River.

The region’s affordability, coupled with improved internet connection from satellite broadband, has pushed land sales to a hectic pace in the past two years.

With working from home, either part time or full time, now acceptable and, in many cases, encouraged, the area’s remoteness is seen as less of an obstacle.

Couple that with better roads to the key centres such as Busselton with its schools and medical services, as well as a smoother journey to Perth when required as the state finishes the process of making Perth to Busselton four lanes in its entirety, and this neck of the woods looks a lot more attractive.

“When COVID started we thought that would be a disaster,” said Stocker Preston principal and licensee Alf Fandry, who has sold 80 per cent of Kudardup Village’s first stage in the past two years.

“It has been the reverse of that.”

Mr Fandry said one of the reasons Kudardup and hamlets to its north were attractive was that Augusta, where his business was based, had limited expansion options due to geography.

According to the Australian Bureau of Statistics’ 2021 Estimated Resident Population, the Shire of AugustaMargaret River’s total population was slightly more than 17,000.

The vast majority, more than 13,000, lived in or around Margaret River (10,300) and Cowaramup (2,900) 11 kilometres to its north.

About half of the shire’s remaining 4,000 people are residents of Augusta, the town at Cape Leeuwin.

The remaining 2,000 people sparsely occupy 124,000 hectares, a tiny population that puts recent growth in land development in context.

During the past four years, more than 300 lots have settled in those three key hamlets, which sit on the Bussell Highway between the region’s two major centres, Margaret River and Augusta.

That could easily account for 1,000 new residents, some who may already have been included in the latest population count.

However, with a big amount of land sold in a hectic two years since COVID-19 struck, combining with challenging supply conditions when it comes to builders and construction materials, it is likely the area will swell further as former farmland becomes finished housing.


Click to enlarge.

Darren Blowes, a land development specialist who sits on the board of Nutan Pty Ltd, which is behind the Treescapes development in Karridale, firmly underscores how strong the market has been.

Mr Blowes said 55 of the development’s 60 lots were under contract, driven by post-pandemic demand for lifestyle properties.

“Everywhere rural that was unsaleable three years ago, now it’s red hot,” he said.

For the distant observer, it is notable that the sub-region has been almost entirely missed by the state’s major land developers.

One exception is Perron Group, the state’s eighth biggest developer according to Data & Insights, which has partnered in the Witchcliffe Eco Village.

All the other key developments identified by Business News have been conducted by individuals and syndicates, with investors liberally sprinkled within the area itself through Busselton, Bunbury and Perth’s western suburbs.

Bunbury-based Priority Management principal Stuart Thompson has been involved in two developments in the area, the major subdivision at Kudardup and a venture near Hamelin Bay focused on holiday homes.

Mr Thompson said good long-term planning had been done along the highway to Augusta, with a focus on bigger lots that have kept the developments from appearing too urban.

“These are fundamentally different from the 500 square metre town lots,” he said.

Most settled land sales in the region were around 2,000sqm, although the average was 3,482sqm, and the sales at Kudardup Village recorded in CoreLogic data reflect that.

“The principle is to have something different in the marketplace than the major corporates generally produce,” Mr Thompson said.

Witchcliffe, close to Margaret River, has by far the greater level of development already, both in scale and duration.

Nevertheless, CoreLogic data shows sales were spurred on during the COVID period from March 2020, with substantial settlements since the first lockdowns.

Another early mover was Hamelin Grove, situated at the junction of the Bussell and Brockman highways in Karridale.

Kevin McIsaac, a director of Juventus Pty Ltd, the company behind that Karridale development, said the subdivision had exceeded expectations when released in 2011 but the market collapsed from 2015 to 2018 before rebounding.

Mr McIsaac said the bigger blocks, without kerbs or Colorbond fencing as well as infrastructure such as onsite sewerage, provided a low-cost rural-type alternative to what was typically on offer in the region’s major centres such as Margaret River’s township.

He said that blocks of 2,500sqm or more were attractive, with the sweet spot for sales probably around 3,000sqm.

Hamelin Grove sales data shows an average of more than 2,700sqm for settled blocks.

But Mr McIsaac highlighted the need for patience.

Hamelin Grove’s original land purchase was in 2006 for $1.8 million but the experienced developer bought out his partners when the GFC hit the syndicate he was involved in.

Mr McIsaac said everyone had the best of intentions but there were many parties to the approvals required and the capital needed to ride the planning process was substantial.

“One of the challenges of land development is the process of rezoning land from whatever it was to development can take a long time,” he said.

After 14 years on this project, Mr McIsaac doubts he would be doing another one, noting the possibility a proponent could get caught between the state government and the local council, as different views fought for ascendancy (as they did in Karridale).

“That adds considerably to the cost of land,” he said. “We had five to six years of holding costs, which delayed delivery.”

Mr McIsaac is not alone in highlighting that land development is not for the faint-hearted, even if the difference between the wholesale price of land and its post-subdivision sales value might look attractive.

Mr Blowes said patience was a vital ingredient, notwithstanding his commendations regarding the local council as “very helpful” and “especially reasonable”.

“The process takes a very, very, very long time,” he said.

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