Residential development has become a much-maligned topic in the media. With the press concentrating fanatically on an oversupply in apartment markets, important details are often left out of the discussion. A recent Charter Keck Cramer Insight addresses these details, outlining in particular the ‘self-governance’ of projects requiring a significant amount of pre-commitment prior to going ahead. You can access this article via the following link here.
Underpinning this self-governance is a significant change in the lending environment. Financiers have an increasingly stringent lending rationale and a decreasing appetite for development projects. As such, adroit developers with well-conceived, quality projects are the ones that receive finance at a viable rate. Compounding this with tighter planning law surrounding the quality and density of development, developers are having to put higher quality projects to market.
We felt this article was an interesting and insightful counterpoint to some of the hysteria that is currently playing out in some sectors of the press. Whilst we do believe there are certain areas with oversupply and projects that will fail, our view is that market conditions are preventing much of the future supply being viable. Our focus is, and has always been, on settlement risk. There are many examples of what we would consider are apartments sold over the “market price” and these will become increasingly hard to support with valuations and bank finance come settlement time.
Well priced, highly specified and well developed apartments will always have a market. Demographic shifts are shifting the traditional notion of what constitutes “home”, however value for money never goes out of style!