Future apartments pipeline shrinks as site sales plunge

High-density developers placed their future pipelines largely on hold due to the pandemic, with fresh research showing development site sales plunged to a seven-year low in 2020.

Research by Knight Frank showed there was just $4 billion worth of residential site sales last year, a 19.6 per cent fall from 2019 and well below the 2014 peak of $11.3 billion.

Knight Frank’s report also showed the national apartment pipeline slowing significantly, with 86,4000 new apartments planned in Sydney, Melbourne, Gold Coast and Perth for the next three years.

From 2018-2020, developers delivered more than 135,000 apartments to those markets.

Gold Coast bucked the trend of declining high-density site sales, with a 238 per cent surge in transactions in 2020.

In Brisbane, however, high-density site sales fell by 86 per cent in 2020.

New South Wales accounted for almost half of all residential site sales in 2020, with its $1.98 billion of transactions leading the country.

The total value of Victorian residential site sales hit $1.29 billion.

On the flipside, there has been significant growth in low-density site sales, with the share of total transactions rising from 10.1 per cent in 205 to 23.1 per cent in 2020.

Knight Frank head of residential Shayne Harris said the data showed that developers were continuing to shift their focus and risk to boutique apartment projects and low-density estates.

“Although we’re in uncertain times, we can’t underestimate the impact investors will have on the apartment market as they start to return across the country,” Mr Harris said.

“It’s only time before they’re lured back to the new apartment market given the cheap finance, a thinning new supply pipeline and lowered residential vacancy rates.”

Knight Frank head of residential research Michelle Ciesielski said developers were responding to a change in habits by apartment buyers.

“We already knew downsizers are most attracted to a three-bedroom configured apartment, but with the pandemic, there will be increased competition from other cohorts securing this third bedroom for the home office and potentially a second living room, when required,” Ms Cieselski said.

The research also showed the impacts of declining international investment in Australian residential real estate, with the value of offshore sales falling to pre-2013 levels.

Knight Frank said 2020 was the first time since 2012 that the value of overseas investment had fallen below $1 billion and was well below the peak of $5.25 billion recorded in 2016.