SOMETHING'S GOTTA GIVE AS SOUTHERN MARKETS EXPLODE
Written on the 1 May 2015 by Nick Nichols
SYDNEY property prices have gone ballistic and Melbourne is on the rise, yet the Gold Coast is seen as the most stable property market in Australia.
Something's got to give, says Villawood Properties' co-executive director Tony Johnson.
The Melbourne-based developer, who has boosted his company's presence on the Gold Coast with a new office at Southport, sees the hallmarks of a boom waiting to happen and Villawood is aiming to seize its share.
"It's been almost eight years since the GFC, so from a trend point of view the markets in Sydney and Melbourne have come back strongly post-GFC, whereas Queensland has lagged," says Johnson. "I think it's due for a change."
Johnson says the dynamics of the market are the most dramatic he has seen in his career, describing the Sydney "bubble" as the key to prices in both Melbourne and south-east Queensland.
"In my 30 years' experience in this sector, I have never seen the disparities we have between Melbourne and Sydney.
"Sydney land (around $400,000 per lot) is twice the price of land in Melbourne. What that tells us is either Melbourne is going to move upwards or Sydney is going to move backwards.
"Most of the experts I speak to out of Sydney say there's at least a couple of years for that market to run. We are seeing price growth in Melbourne, and if (housing lots) move out of a base of $220,000 to about $250,000, and even $300,000 is possible, then you will always put south-east Queensland in the bracket sitting under those two and you will see price pressures up here."
Villawood has two Gold Coast projects in train, including a major development at Helensvale, known as Elandra and comprising 1000 housing lots and 1000 apartments. The Helensvale project, located on the 89ha Gold Coast Country Club site formerly owned by the late Paddy Buckler and adjacent to the Helensvale Town Centre, is due to be launched next year.
Johnson says Villawood is not concerned by the size of this major infill project, arguing that the Gold Coast market is one of the most promising in the current property cycle.
"Helensvale is a long-term project," Johnson tells Gold Coast Business News. "But I think you'll be surprised when it turns up here, it might turn fast. In Melbourne it's not uncommon in a hot market for us to sell 200-300 products (a year) in one estate. Sales rates can be up to 50 per month in Melbourne at the moment. If the market kicks, Helensvale may only be a three-year development."
Villawood currently delivers about 1200 lots a year across its portfolio, making it one of Australia's fifth-largest developers behind the likes of Mirvac, Stockland and Lend Lease. It has a national pipeline of 16,000 lots, including 9000 new lots worth $1.8 billion due to come on to the market in Queensland and Victoria over the next three years.
The company, founded by Rory Costelloe in 1989, is privately owned with Johnson coming on board as an equity partner and director in 2006.
The company has spent about $60 million on acquisitions in Queensland over the past year. On the Gold Coast, it has just launched Montego Hills, a 150-lot acreage estate at Kingsholme.
Villawood has been developing in Queensland for years, including a project at Casuarina just south of the border on the Tweed Coast, but Johnson concedes there's a different culture here that needs to be respected.
"It's a much more cyclical market and always has been," he says. "The Gold Coast is typically tourism based and jobs are the key here. History tells me that the Gold Coast will be dictated by jobs. There are concerns there, but I believe the Gold Coast City Council is about creating jobs and I see it happening as a natural course of action."
In a bid to lift its profile in Queensland, Villawood has moved its state headquarters from Nerang to Zupp Property Group's office tower at 64 Marine Parade in Southport. Johnson says the office currently has three staff but will be growing.
Villawood has developed a reputation for urban design, creating more than 60 award-winning master-planned communities over the past 26 years.
Johnson says Villawood largely targets owner-occupiers, with only 5 per cent of sales in its Melbourne projects selling to investors.
"Traditionally south east Queensland has been 50 per cent investor products," says Johnson, who believes the company can gain market share without having to market to Chinese investors.
He says Villawood may "entertain up to 20 per cent investors" for its Queensland projects, "but under a very much more controlled ratio".
Author: Nick Nichols