Sydney developer Allen Sammut says apartment prices in his 37-level luxury tower overlooking the beach at Surfers Paradise have doubled since the project’s launch almost 2½ years ago.
“We’re averaging $6 million per apartment and most of the enquiries are coming from Sydney and Melbourne,” he told The Australian Financial Review.
Sammut Group has sold 43 of the 53 half-floor and full-floor residences in the tower, tapping into strong demand for large, owner-occupier residences.
Mr Sammut attributes much of this success to the fact the project is well under construction – the basement slab has just been laid, and a crane has been erected to build the upper levels. It is due to be completed in 2025.
“The market is definitely full of confidence again, especially for projects under construction and where completion is a certainty,” he said.
While other developers such as Central Equity were axing Gold Coast projects last year due to soaring costs, Mr Sammut decided to kick off construction of the Coast GC tower, even if it meant a smaller profit margin.
The developer appointed tier one builder Multiplex to undertake the $200 million Garfield Terrace project in July last year, locking in a fixed price.
The crane has gone up at Sammut Group’s high-rise tower.
The higher prices being achieved off the plan had “slightly” offset a 30 per cent surge in construction costs, but had in no way negated them, Mr Sammut said. Still, he expects to make a profit.
Though construction costs have stabilised, Mr Sammut said higher prices were now the norm and a drop in pricing was not likely any time soon.
“The pipeline of government infrastructure projects and those tied to the Brisbane Olympics is putting a strain on supplies and labour,” he said.
Adrian Parsons, managing director of Gold Coast-based project marketing firm Total Property Group, said while there was not an undersupply of off-the-plan apartments, there was an undersupply of off-the-plan projects that had a builder attached.
Total is marketing five premium projects, including veteran developer David Devine’s under-construction Royale at Surfers Paradise, where the average purchase price is $4.5 million.
‘Phenomenal’ amount of enquiry
“For more advanced projects that are under construction, supply is at critically low levels, and that will continue to apply upward price pressure over the next two to three years,” Mr Parsons said.
“The amount of enquiry for under construction or nearly completed apartments is phenomenal.
“We have a lot of buyers from interstate, but our strongest markets are still Brisbane and the Gold Coast. These are buyers who know the area well and who want to downsize or buy a second residence.”
While none of the projects Total Property is marketing have stalled or been axed, Mr Parsons said many smaller developments had not been able to secure a builder because “there are not enough to go around”.
“Developers with well-established existing relationships with major builders can get their projects off the ground, while some of the Sydney developers are bringing their own building arms to the Gold Coast and staking a position in the luxury market,” he said.
They include Rich Lister Sam Arnaout’s Iris Capital, whose in-house construction arm Iris Built will complete its $800 million two-tower project, Victoria and Albert at Broadbeach.
“Early works are nearing a milestone with the perimeter wall now complete and piling commencing in the first week of November,” Mr Arnaout told the Financial Review.
“Labour [supply] remains tough, but we are seeing construction costs normalise.”
Another Rich Lister with a big exposure to the Gold Coast apartment market is Melbourne-based developer Tim Gurner.
In August, Gurner Group sold out the first stage of its $1.7 billion La Pelago resort-style project at Budds Beach. The project is a joint venture with real estate investment house Wingate.
Though a builder has yet to be finalised, Mr Gurner said his group was working exclusively with a tier one contractor to finalise a price, so construction could start next year.
“Labour in Queensland is still in short supply due to the unprecedented pipeline of government infrastructure projects either under way or planned to commence,” he said.
“We are hopeful that the state government can work with the industry to address this critical labour supply issue and create a pathway for more private development projects to access the limited labour resources that are in play.”
Article source: www.afr.com