Program Creep Costing SEQ’s Apartment Pipeline

It has never been harder to build medium and high-density projects than it is in South-East Queensland right now. The cost of construction, the cost of poor productivity and the taxation of development is generating serious challenges to the delivery and the affordability of apartments in Queensland. Data from the Property Council of Australia indicates that “apartment-killer” taxes in Queensland have resulted in 33,000 fewer apartments in the past eight years. PCA Queensland executive director Jess Caire said taxation had “put a handbrake on housing delivery all together”. Australian Bureau of Statistics housing approvals data released this week shows a steep decline in approvals of 1214 apartments approved in nine or more storey blocks in August, down from 2504 in July. Poor onsite productivity is also adding time and money to the cost of building programs . Recent Urbis data conveyed eye-watering delays from planning through to completion Speaking at a PCA breakfast, Frasers Property chief executive Cameron Leggatt said productivity challengers were heavily impacting project viability. “From a distance with the Olympics, with the growth story, South-East Queensland is appealing,” Leggatt said. “But if you then narrow it down to medium-to-high-density apartments it’s really challenging because things are taking longer. Things are costing more, so that means you need more money to invest in the project, and the money is going to be invested for a longer time. And that all weighs on risk and reward. “When things are taking longer and the returns don’t look so good, it’s hard to attract the capital and get it approved.” ▲ Frasers is developing it build-to-rent Brunswick &amp; Co at Fortitude Valley, and has kept another high-density project in the suburb on ice. Leggatt said Brisbane had all the right ingredients but taxation reform and addressing productivity challenges were needed to grease the wheel. “If you can build something back like we used to 20 years ago you can reduce a lot of those fixed costs,” he said. “You’ve got cranes, scaffold in sheds, and they’re all sitting there for a year or 18 months longer and that all just goes to the bottom line. “I think you would be really surprised if everyone got their feasibilities out and took 18 months off the program, how much that would save, and how much more viability would come through in projects. “We’ve really put ourselves in a tough corner.” Mirvac build-to-rent project director Catherine Atkinson said program creep was problematic in Queensland. “We have strong challenges with delivery certainty here in Queensland and that undermines program assumptions and returns on investment,” Atkinson said. “Program creep is happening year on year on year and our global investors are not ignorant and they’re not shy to that.” ▲ Mirvac ’ s dual-tower LIV Anura project is being built simultaneously with the $180-million high-end Quay Waterfront Newstead riverside project. Atkinson said supporting subcontractor base, working on delivery certainty and attracting labour to Queensland would help to address the industry’s challenges with program creep, which she says is less of an issue in the southern states. “There are so many shovel-ready projects out there right now, and if we can turn the levers and activate capital investment into our state and support our construction industry there’s opportunity,” she said. Pikos chief executive Michelle Wooldridge agreed there were opportunities but said South-East Queensland was at a critical juncture now in terms of housing supply. “It’s really at a critical point now, it’s going to be so hard to make any impact and unravel what has happened over the past five to seven years,” Wooldridge said. “We cannot do it all. The subcontractors do not want to work for private developers. I don’t think we can be critical of that because if you’re a builder you’re going to gravitate to where your money and your job is safe. “I think productivity is a huge issue and I guess what we’re seeing on the ground is the subbies want to work, they want to be productive but there’s not enough projects turning soil.” Pikos will break ground on its Gaia project at Kangaroo Point next month.

Residential
Taryn Paris
Wed 09 Oct 24

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ResidentialTaryn ParisWed 09 Oct 24

Program Creep Costing SEQ’s Apartment Pipeline

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Productivity Commission Maps Escape from Housing Affordability Dead-Ends

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Residential
Taryn Paris
Wed 09 Oct 24