The high activity in the Canberra multi-unit development site market seen over the past two years looks set to continue into 2015. The first three months of 2015 has yielded record levels of investment totalling $80.446 million across 18 transactions which is expected to yield 1,166 apartments. It is anticipated further properties current to market will see the first half of 2015 closer to 2,000 apartments outstripping the prior high in transactions during the first half of 2014 which resulted in over 160 million changing hands where foreign investors/developers pursued over 40% of the total volume. During these first three months, activity has been spread across a range of local developers taking the plunge into the Canberra development sphere with no activity from off shore groups. This is emphasised by the volume of smaller transactions, with six sites sold for under $3 million offering sub 30 apartment projects which were hotly contested by builders, consortiums and other groups previously not as aggressive in this market. The number of larger projects however has driven this high volume with four projects over 100 apartments, including the 240 apartment mixed use development in Kingston for $14 million.
With over $80 million sold in the first three months of 2015, this represents 1,166 potential apartment supply, with the split across regions has been somewhat in line with the trends over the past 18 months. Gungahlin investment has been the most stable over the longer term and will likely yield in 195 apartments, similarly Belconnen and Molonglo will result in 259 and 380 apartments respectively. The majority of the Belconnen units will be delivered in the newly created suburb of Lawson. In this period the Kingston site adds 240 apartments to Inner South, while a smaller development in Greenway adds 54 apartments to Tuggeranong region. Since the beginning of 2014; over $270 million has been transacted by the Land Development Agency which has the potential to add over 1,300 apartments to the Canberra market. The activity over this time has been very evenly split, ensuring land release is scattered across the city; the bulk of new development opportunity coming to Belconnen and Gungahlin with 747 and 712 apartments estimated respectively. However, Inner South (694), Tuggeranong (666) and Inner North (638) all are anticipated to provide high volumes of supply with Molonglo slightly trailing behind with 530 expected.
Like many other cities across Australia, the cost of development sites has shown considerable uplift over the past three years. Canberra witnessed strong interest by foreign investors during 2013 and 2014 which was another catalyst in growing the average site values; similarly single entities buying multiple sites caused many developers missing out historically resulting in more aggressive pricing strategies for future purchases. However more recently, the banding together of smaller, local groups have resulted in the smaller site values growing significantly. The sub 30 apartment sites have attracted an average value of more than $140,000/ site so far during 2015 which is reasonably consistent across the six transactions recorded; and substantially ahead of the value achieved in 2014 of $97,000/site. Whereas the value in the larger sites (30–100 apartments) varies more so dependent on their location. During 2015 the sales achieved within Belconnen averaged values closer to $95,000/site (primarily in Lawson) and Gungahlin was closer to $50,000 bringing the total average to $73,000/site slightly behind the whole of Canberra
average achieved in 2014 of $78,000. Limited turnover in the 100+ bracket in 2014 resulted in a slightly skewed result; however given the volume of sales in 2015 thus far the average of $55,000/site is indicative of the broader market which suggests growth of 46.97% in site value over a two year period. This growth is also effected by a higher proportion of inner suburb sites (Kingston Foreshore, Campbell 5 and Lawson) being released in the past two years.