Looking to become a property developer? It is important to shift your mindset from the thought process of a home buyer to ‘strictly business only’. You need to think more from your buyer’s perspective and less from a personal point of view. Your main focus should be on making a return on your investment. Here are some of the things you will need to consider:
Location is key. A good property developer will do extensive research into the area they would like to develop in. Focus on the suburbs where developments are popular and avoid looking in areas simply because you could see yourself living there. Look for land in suburbs that have good growth and large blocks to split. Keep in mind public transport and local amenities and pay close attention to R-Codes. No point in buying land that has limited subdivision possibilities. Found a property or suburb and not sure about the areas R-Codes or how many dwellings you can build? Contact us for a free block assessment.
Investing is a numbers game. Remove all emotion and focus on return. Perform a feasibility study (we can also help you with this!) and calculate the estimated yield. If you plan to rent out the properties what is the current local rent and where is the market heading? If you plan to sell, what are other local developments going for?
It is important to weigh in risk when investing so you aren’t left with unmanageable debt. It is likely you already own other properties and it is important to consider how you will juggle them all when it comes to finances. We advise speaking to a professional and working out your borrowing capacity and financial management to help lower your financial risks.
4. KEEP UP-TO-DATE WITH THE MARKET
As mentioned above, keeping an eye on the market is important when investing. This will help you predict future rent and sales. It will give you an idea of the direction of the property market and the demand for developments. It is important to remember that market predictions are only guesses on where the property is heading and this is where you must factor in risk.
5. THINK LIKE YOUR BUYER
Steer clear of trends and particular details. Think of the design features that will appeal to most buyers and remember, this isn’t your home you’re building.
6. PROPERTY AMENITIES
What will your tenants or buyers want? Consider amenities that will increase the competitiveness of your development such as heating and cooling, space for a dishwasher, outdoor living or an area to work from home (office/study nook/spare bedroom).
7. LOOK TO THE PROFESSIONALS
Seek professional advice when making decisions. Choose a company that knows what they are doing and can guide you through the development process. This will give you ease of mind, lower your risks and help you keep momentum on your project.
Check out some of our past development projects here.
WA is primmed for growth with the Australian Government announcing they will be opening visas for up to 200,000 migrants when borders are fully opened which will assist in economic recovery post-pandemic. The government is focusing on bringing in skilled individuals, as well as students and refugees. Evidence is showing when the borders begin to open, the housing market will be in high demand and with plenty of jobs available, Western Australia (WA) is looking to be an attractive state for immigrants to settle. These immigrants will need somewhere to live and with our current low supply, housing demand is only going to increase proving now is a great time to develop.
It is common knowledge that tradespeople are in high demand. Skilled labourers from a number of different industries are in dire need; as mentioned in our previous blog explaining some of the reasoning behind the low supply of tradies in particular in the construction industry. If you were to do a job search on SEEK, you will notice over 1,000 jobs available for Diesel Fitters with multiple sign-on bonuses. On top of that, some employers are offering their staff bonuses just to bring in skilled labourers. This particular job search is a good indicator of the Western Australian job market and shows there is plenty of work out there for tradespeople in both the construction and mining industries. Great news for the 200,000 migrants Australia should soon be expecting. WA will be an attractive prospect for those skilled migrants with our high demand for labourers which will, in turn, add further stress on housing and rental demand. This could work in favour of the sale of your future development.
Most immigrants rent in the first few years.
This is just what property investors want to hear. The current high rental prices and low availability is already working in their favour and the prospect of that demand increasing is a great incentive to purchase their next rental property such as a unit from your future development. In addition, they almost have a guarantee they will find tenants and receive a decent rental income. If you are sitting on a block big enough for multi-units especially if you are close to a university or public transport you should expect a lot of interest, come sale time. Incoming foreign students will be on the lookout for rentals close to their place of study which makes multi-unit dwellings an attractive investment purchase.
Immigrants are likely to buy within a few years of moving.
If you have developed before you are likely aware of the time it takes to submit building applications, plans and gain council approval for your development and with the current building delays, your next project could take longer than expected. Therefore, leave yourself with plenty of time to get your development completed. Start looking for land and securing a block for your next project now so you can be prepared and have homes built and ready to go when these immigrants are looking to buy.
“With borders opening in 2022, a significant pick-up in immigration will fuel further demand, right at the time when supply is struggling to keep up due to the labour shortages in the building industry.”
– Damien Collins – Head of Real Estate Institute of WA (REIWA)
Don’t wait for building prices to go down. Strong evidence suggests demand should start to pick up mid-end of next year if borders in WA open which could cause increases in housing prices. This is why now is a good time to get a move along on your development before the influx of immigrants hits our state. Help fill the current supply gap in the housing market by getting your development ready to go.
Starting a development is easier said than done. It takes time to get things moving, to find land, submit applications, get council approval, which is why getting the ball rolling sooner rather than later will put you in a better position for the near future. Contact us to help you get started on your project.
We can help you with your search for land, building plans, council submissions, EVERYTHING from start to finish. If you are still not sold on the clear evidence provided, in addition, we will do a feasibility study for your prospective project to give you a good indication of the returns you should expect.
Send Jubilee Homes Director Joe Snare a message today:
(08) 9571 3512
It is a common misconception that builders are the ones benefitting during a construction boom while consumers get caught with increasing prices and longer wait times. This can cause some frustration however, these booms are no walk in the park for small builders let alone the larger ones.
The global economy took a hard hit when COVID-19 emerged. The pandemic caused many strains on a number of industries including residential construction. To help stimulate the economy the federal and state government announced the building bonuses. The building industry is one of the largest employers in Western Australia which meant these bonuses would help keep a large portion of the population employed. As a result, the industry had a sudden increase in activity however there have been some side effects to this sudden boom and COVID-19 has increased the strains on builders which in turn, unfortunately, gets passed on to the clients. This is a time of understanding and patience. If you are building in the current climate it is important to understand why there are delays and what is causing them.
“Builders are now experiencing a range of pressures associated with the huge levels of activity, including significant cost escalation as a result of labour shortages and material delays caused by the ongoing disruption from COVID-19 to global supply chains.”
– HIA WA Executive Director, Cath Hart
You may have already heard of the current trade shortages with an emphasis on brickies. As a result, there are many Perth builds at a standstill, ready to progress to the next stage of construction however not enough tradies around to finish the job. The shortage of brickies in particular stems from the last boom where a good number of older professionals moved over east and of those who stayed, many have retired. On top of that, there was a low intake of new apprentices in WA. As a result, the current industry boom is seeing tradies like brickies left in high demand and a lack of professionals out there to meet building needs. This is an issue both small and large building companies are struggling with. Jobs are getting delayed and on top of that, tradesmen such as brickies are hiking up their prices.
The building industry is currently battling with material shortages such as steel. Iron ore is being sold to China at high prices however is coming back in steel form at equally high prices and we are not getting enough of it to keep up with demand. Timber is another material that is in high demand with shortages being experienced globally as a result of fires in both America and Australia as well as the shutdown of timber plants thanks to COVID-19. There are efforts in place to try and tackle the wood shortage. The Australian Government has allocated $15.1 million to help tackle timber shortages with aims to salvage bushfire affected softwood from Kangaroo Island.
All these shortages are normal during a boom period however with the added pressure of the pandemic these constraints are even more difficult to workaround.
While you may be thinking builders are the ones to benefit from the booms this is not always the case. Yes, there are more projects available however with tradies and suppliers hiking up their costs and delays in supply, builders are having to struggle to keep costs down for their clients, coordinate labour delays with material shortages and receive progress claims to ensure cash flow.
“From the builder’s point of view, especially where you have a lump sum contract, it’s fixed at the top end so you can’t necessarily increase that.”
– HIA WA President, Dean Humphrey (Building WA Podcast)
So how is Jubilee Home Builders managing these obstacles? We believe transparency and communication are key. We are communicating openly with our clients on cost expectations and are trying our hardest to keep our clients within their budget. We are also creating realistic timeframes and are working with our tradesmen closely so we can communicate labour delays.
The prospect of building with the current trade and supply shortages may sound offputting however these obstacles are no reason to delay building your dream home/development plans and capitalising on low-interest rates during construction. With the right builder to guide you through the process, you can build with minimal stress and surprises. If you are thinking of building your next home or developing land in the near future get in contact with our team today.
Contact us on:
08 9571 3512
STATS AT A GLANCE
RETURN ON EQUITY: 111.85%
RETURN ON INVESTMENT: 31.06%
GROSS PROFIT: $768,229
NET PROFIT: $633,761
Developing and building with Jubilee Home Builders is a service from start to finish. For the quadplex at 90 Star Street, Carlisle, we provided the client with support throughout the whole process including the acquisition of land, applying for permits and titles, ensuring a quality build and chose a high performing local agent to sell the homes.
What we offer is guidance, support and expert advice throughout the development journey giving our clients peace of mind they are making a worthwhile investment.
The client purchased the land in October 2019 through a local buyer’s agent. The intention was to develop and sell the properties upon completion.
Careful research went into finding the ideal location for a development with a large focus on local amenities. The result was 90 Star Street, Carlisle a perfectly positioned block located in close proximity to Perth CBD, the river, casino, and the Victoria Park cafe strip. The property was within walking distance to public transport, numerous local parks and the popular Archer Street meaning residents would have everything they needed on their doorstep.
Sub-division and DA drawings were started immediately after executing the offer and acceptance from the vendor. The DA and building permits were approved by March 2020.
The beginning of construction experienced delays due to the Covid-19 pandemic. During this time uncertainty in the economy and property market caused hesitations however the client powered through and as we moved further through the year confidence gathered momentum.
Demolition of the existing dwelling and the sub-division into 4 separate titles was completed by August 2020 and the beginning of construction followed in October 2020.
Construction finished in July 2021 taking a total of 9 months to complete. The 4 villas were then staged, photos were taken and put on the market with the best local agent.
There were 51 groups through the first home open weekend and all homes went under offer within 3 weeks. The properties sold for 20% higher than the bank valuations done in the previous year (February 2020).
We couldn’t have asked for better results and despite the brief period of unexpected delays and uncertainty, the client was extremely happy with the support they received throughout the development process.
If you’d like to learn more about how we can help you achieve your own property development goals – we’d love to chat. Why not meet at our display home at the Carlisle development and you can see firsthand the design and quality of this build.
Contact us to arrange an appointment today:
08 9571 3512
What is typically a slow few months for the Perth housing market, proved to surpass expectations with the market showing positive signs of growth during the winter months. This growth supports claims that the property market is in a recovery stage and with low supply now is a great time to get your investment underway.
Sales and growth activity traditionally slow down during winter as sellers tend to hold out until the spring weather kicks in to present their property to the market. That was not the case this winter with the Real Estate Insitute of Western Australia (REIWA) recording increases in median house sale prices in a total of 233 suburbs from May 31st to August 31st. This number is over half the growth recorded in 2020 with only 104 suburbs seeing an increase in price indicating the market is on its way to recovery.
Some of the top suburbs of growth include Brookdale (16 per cent) followed by Churchlands, Swanbourne, St James and Wembley Downs.
“The Perth property market is firmly in a recovery phase and many suburbs are feeling the benefits of this current growth cycle.” – Real Estate Institute of WA president Damian Collins
On top of this positive increase in suburb growth, Western Australia has recently been rated as the most affordable state in Australia for housing and rentals (Real Estate Institute of Australia’s Housing Affordability Report) despite price increases. WA Rentals are the most affordable in Australia requiring less than 20 per cent of a family’s average income for repayments.
Chart 1. Housing and rental affordability. Chart from REIWA,
WA remains cheapest state for housing and rentals
Looking at the country as a whole, recent data from the Australian Bureau of Statistics showed an increase in July housing finance activity. Investor activity, in particular, was increased by 1.8 per cent for the month.
First home buyers and owner-occupier activity dropped off likely due to lockdowns over east and we may see further reductions in lending statistics as the Home Builder grant comes to an end.
Refinancing commitments are surging to an all-time high and it comes as no surprise. This month the Reserve Bank of Australia (RBA) kept the cash rate at 0.1%, working in favour of states that have experienced lockdowns. These low interest rates are likely encouraging many owner-occupiers to refinance and this number is expected to rise as more property owners give their home loans a spring clean.
Currently, you can expect variable interest rates to be around 3.07 per cent on average and roughly 181 mortgage rates on the market for under 2 per cent. This is great news for buyers and investors looking to secure land with a low-interest rate.
Growth in investor loans has also seen an increase and nearly double of that 12 months ago. More investors are re-entering the market which indicates overall confidence in the economy and is looking up for private rentals.
The market is looking hot and at perfect timing too as we exit our winter wonderland and move into the springtime madness. With high buyer demand, low market supply, interests rates at a record low and investor activity on the rise, now is a great time to secure your block of land and prepare your investment for sale.
To discuss your investment options contact Jubilee Home Builders on 08 9571 3512 or email us at [email protected]