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Building for City’s Future no Easy Task
The Geelong region’s population of around 285,000 is expected to near 400,000 by 2040 and property developers will play a key role in facilitating that growth. But complex planning rules, rising costs and an uncertain economic environment are just some of the challenges hindering current and future progress, according to a top local developer.
Originally from Bendigo, executive director of Villawood Property Rory Costelloe has lived in Geelong for more than two decades. Villawood began purchasing lots in Armstrong Creek in 2006 and would go on to purchase a 3000-lot subdivision, inspired by its developments in Marriott Waters and Point Cook.
“Once you get to know a place geographically, then you get to know the property geographically and you take interest in being a developer as well,” Mr Costelloe said. “We brought an entirely new standard – we were used as the benchmark from the very start.
"With Geelong being the fastest-growing regional city in Australia, we continue to identify new needs and are willing to invest to supply those needs” - Phil Petch
“We have lifted the bar, or set the bar, for everybody.” Construction of Villawood’s Armstrong estate at Mt Duneed started in 2012, with construction of the estate delivering an end value of about $1.5b, according to Mr Costelloe. However, he said complex planning rules were hindering development applications. “In the old days it used to take two years to get rezoned, now it takes seven years,” he said. “Supply equals demand. “Everybody talks about affordability if you have supply that equals demand, and if you have competition, that creates affordability.
“The planning system is so constricted, it takes so long to get these growth corridors up and running through the planning stage, that we have little supply, and then have just pushed prices up.” Mr Costelloe said the economic climate, notably the interest rates rise that have increased regularly since May 2022 – going up 13 times in 15 months – was challenging for both buyers and developers. He also described risk management as a major challenge for developers. “Nobody can make a decision anymore, everybody just worries about the risk, it is just a very, very bureaucratic world,” he said. Marcus Jankie, general manager of Up Property, said as long as the population continued to grow and both government and private sectors continued to invest, the long-term outlook for developers would remain positive.
“The immediate issue is finding the balance between what the market is ready to pay for both residential and commercial end products, in comparison to the costs and obstacles to deliver these projects,” he said.
Phil Petch, founder of IDS Developments, said one of the biggest issues facing property developers was the 40 per cent increase in building costs since before Covid. “This makes it difficult to maintain a proper margin, as construction costs keep rising while our selling prices stay stable,” he said. “With fixed prices and climbing expenses, it has become increasingly more challenging to preserve our profit margins.” Mr Petch said Geelong had an exciting future.
Paul Franze, the developer behind the $200m Geelong Quarter on Ryrie St, said the cost of sites was somewhat prohibitive, and construction prices were 30 to 40 per cent higher than what they were just 18 months ago. “Depending on what you’re developing, whether it be office or residential, from a mum and dad investor, with interest rates where they are and potential risk of rate rises, investment products and even owner-occupied products is somewhat slowed down because people are just battening down the hatches and waiting to see what transpires,” he said.
To view the full article published in the Geelong Advertiser by Satria Dyer-Darmawan and Peter Farago on 22nd May 2024 here:
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