The media is currently full of real estate ‘doom and gloom’ – real estate repossessions and arrears are up and real estate prices are down …real estate pacific pines its almost as if the ‘sky is about to fall’! This situation has seen many real estate developers, and property investors generally, leave the market – and for those thinking of starting out in real estate development, these are scary times indeed.
What seems like the worst time to get into real estate development can, in reality, be the best time. Successful real estate developers today realize that they can use time to their advantage – their real estate development projects will typically not be ready for sale or rent for 2 to 4 years from inception. So if they have bought well, they are less likely to be affected by the economic situation at the time of purchasing their real estate development site.
In fact, a weak market is a real estate developer’s paradise, because a weak market is a buyer’s market, and one of the first steps to any real estate development project is securing a viable real estate development site on the best possible terms. Although we know that the real estate development business is cyclical, and many parts of the world are in a property downturn, we also know from history that knowledgeable real estate developers are successful in any market – falling, flat or rising.
We’re working towards what we believe the economic conditions will be in 12 to 36 months time. Indeed we ourselves are still active in the market – seeking Council permission for a number of real estate development projects. This gives us the opportunity to act quickly and build our approved real estate development projects when the market does become buoyant.
It is our opinion that the following market signals are some of the key factors that will lead to increased future opportunities, especially for real estate developers:
–The pent up demand for housing. In March 2008 leading Australian economics forecaster, BIS Shrapnel chief economist Dr Frank Gelber argued that housing prices across Australia will rise by 30% to 40% over the next five years because of the built-up shortages of housing.
–The current Federal Government has stated that they will work towards increasing Housing Affordability and have begun to announce incentives including Tax Credits of $6000 per year if the housing is rented at 20% below market rent.
–We believe that an increasing number of people, in the short to medium term, are likely to require the rental accommodation that we intend to build. This is due to either their financial stress (can’t afford to purchase a home) and/or demographic trends (including Gen-Ys who are less likely to buy Real Estate).