Land Development

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Developers within the Australian Capital Territory need now apply for land tax relief using the Application for a Builder’s Land Tax Exemption Form due to changes in the Land Tax Act 2004 (ACT) which came into effect 24 November 2015.
Prior to the change, land in the ACT owned by a company to build residential homes for sale were exempt from land tax for two years.
Now a builder or land development company must apply in writing for a declaration that a parcel of ACT land is exempt from land tax. 
The company will be eligible for the declaration if the parcel is used by the company only to construct new residential premises and if the new residential premises are to be sold by the company when finished, according to Meyer Vandenberg Lawyers, who said once a declaration is given, the exemption applies for two years beginning on the first day of the first quarter after the company becomes the owner of the land.
The Application for a Builder’s Land Tax Exemption Form can be found <a href="https://www.revenue.act.gov.au/duties-and-taxes/land-tax/general-information" target="_blank">here</a>. 
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Property 101: ACT property developers must now apply for land tax exemption

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Sydney's south west developer Dahua Group Australia capped off a busy month at its $1 billion New Breeze housing estate at Bardia.
All 85 land lots released in April for the projects first stage sold, for a total of $36 million.
It sales ranged from $330,000 for a 250-square metre lot up to $588,000 for 589 square metres.
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Bardia land lots selling well for Dahua Group

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Nearly 15,000sqm of developable land in Perth’s southern suburbs has been listed for sale with expectations of around $2.1 million.
The land, 535 Millar Road, Wellard, is 38km south of Perth and fronts the Kwinana Freeway. 
Ryan McGinnity from CBRE said the opportunity came at time when Western Australia’s residential market had received a considerable boost with changes to the First Home Owners Grant.
“Given the State Government’s recent decision to increase the First Home Owners Grant to $15,000 for new builds, residential development opportunities in high growth suburbs such as will be of strong interest to developers,” he said.
“With development approval to accommodate 22 green title lots, this property presents an attractive opportunity to undertake a residential project in a proven growth area.”
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Residential development land in Perth's Wellard growth zone listed

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Queensland property group CFMG Capital has unveiled their latest investment opportunity from its $200 million CFMG Land &amp; Opportunity Fund, seeking to raise $3 million for a 100-lot community between Brisbane and the Gold Coast.
The new project, Elevate, will be located on a 5.7-hectare site at Ormeau Hills which was recently acquired for its strategic positioning in the thriving development corridor between Brisbane and the Gold Coast.
The CFMG Land &amp; Opportunity Fund is an unlisted managed investment scheme that invests in the development of residential land subdivision projects on a case-by-case basis. The Fund currently holds investments in seven different projects with a gross sales value of more than $200 million.
The Product Disclosure Statement (PDS) for the Elevate project indicates a 12% fixed return per annum over the two-year fixed investment term.
CFMG Capital General Manager Andrew Thomson said the property was settled in June 2018, with a development approval for 96 allotments already in place, with plans to apply for amendments which will allow for Elevate's 100 total lots.
Mr Thomson said the Land &amp; Opportunity Fund was a powerful tool for investors seeking exposure to Queensland's residential land market.
"The Fund's fixed 12% per annum return is quite attractive in a low interest rate environment and only achievable through a combination of our internal development expertise, a commitment to putting returns to investors ahead of development profits and the expectation that Queensland land market will continue to strengthen over the next two years," he said.
"Investors also receive the return on their investment on a fixed maturity date - typically after 18 to 36 months.
"In contrast to volatile property investments based on assumptions, CFMG Capital's fund duration and fixed return policy gives investors a healthy level of confidence that the returns will be delivered."
Mr Thomson said managed investment schemes like the CFMG Land &amp; Opportunity Fund were a sensible alternative for investors looking for property exposure but not the risks associated by directly buying a single property that is heavily leveraged.
"The Fund is based on exposure to dozens of blocks of land in a subdivision or across multiple projects, providing diversification over direct residential property which typically limits investors to one asset," Mr Thomson said.
"CFMG Capital is also a solid investment due to the strict criteria we adhere to before acquiring land to maintain value over the long term," Mr Thomson said.
"Our entire business model is based around securing land with proximity to a major capital city, existing and proposed competing land estates and key planned infrastructure projects.
"We also take population growth and demographics of the locality into account, and ensure investors can secure opportunities in areas with employment opportunities, lifestyle choices like schools, transportation and recreation," he said.
CFMG Capital's Elevate site in Ormeau Hills is 25 kilometres north of the Gold Coast CBD and 40 kilometres south of the Brisbane CBD, and is within one kilometre of the existing Ormeau Town Centre which features a Woolworths, IGA, service centre, health care and a range of specialty stores.
The future North Ormeau Town Centre is also currently under construction 500 metres away with Coles confirmed as the major tenant.
Ormeau Hills has also earned it title as a growth area from the demand generated by the proximity of major transport infrastructure such as the M1 and Gold Coast bus routes, nearby open space and parkland and key employment nodes including the 127 hectare Yatala Enterprise Area, which is projected to inject $1 billion into the local economy over the next decade.
Stage one subdivision works on the Ormeau land are planned for October 2018 and will carry on through 2019, with registration of allotments taking place April 2019 and final stage one settlement later in the year.
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CFMG unveils Ormeau Hills investment offer with fixed 12% return

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A Gladstone coastal land holding with development opportunities has been listed for sale via expressions of interest.
Situated at <a id="LPlnk706759" href="http://ecomms.raywhite.com/collect/click.aspx?u=jRYOrR8N39R+6hBQZ7yXMt0Z3VIjNMZG40szXCCu3Sh5Ey0w4Kgy1BZFFL9hk1g2ZHtHaapiIlE=&amp;rh=ff004855b575d2bd990ec549984891183d3498d4" target="_blank" rel="noopener noreferrer" data-auth="NotApplicable">485 Tannum Sands Road</a>, the parcel offers 1,511 hectares of land across three titles and comes with main road frontage that allows for access. 
The site is being marketed by Ray White Special Projects QLD directors Tony Williams and Mark Creevey.
Williams said the asset was directly adjacent the approved $1.2 billion Hummock Hill Tourism redevelopment and offered potential buyers a number of different options.
“Here we have an excellent potential master planned development and/or tourism venture opportunity, subject to relevant approvals,” he said. 
“What is in place though, is existing permits for sand mining operations, with approvals to clear vegetation in-line with those permits.” 
Creevey said the location of the site was a drawcard and was complemented by the potential growth around the asset. 
“The parcel adjoins existing residential development as well as being surrounded by proposed tourism projects and commercial redevelopment,” he said. 
“Being positioned so close to the Bruce Highway, offering connectivity north and south, is another real positive for the site.” 
Expressions of interest close March 20 2019.
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1500 hectare coastal Gladstone land holding with development potential listed

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Nine months down and heading into the home stretch of 2015, I feel like a lot of local developers are very much standing on the sidelines. They are just itching to get into the marketplace, but have either been the bridesmaid but never the bride in missing out on their desired sites, or are simply waiting for the market to cool down.

If you refer to yourself as a “developer”, you instinctively have trouble with the above two scenarios. You want to find that next project, but you can’t overpay. Surely the market is about to turn downwards. It has to!

The flow of money from Asia has to stop soon, it can’t keep going on like this forever! Maybe, but maybe not. No one has the magic property 8-ball.

Some have turned to selling existing sites (with or without permits) given how strongly the market has performed, while others have looked at sites interstate or further out from the Melbourne CBD, something they would have never originally considered. Whilst most would never admit it, they are now working to smaller profit margins.

Are there risks in the above? Absolutely. Flipping sites is never easy, and the profits can pale (as do the risks) in comparison to actually developing the end product. Investing in an interstate market can be fraught with obstacles, from using an unknown consultant team, misunderstanding local planning laws, and misjudging the end market based on a lack of local knowledge.

Working to a smaller profit margin also leaves one open to a correction in the marketplace from increased supply (or just a stalling of appetite) on end residential values or the mercy of builders/construction cost. If the margin gets too tight, that will trickle onto lenders viability to lend against the project, no matter how maybe boxes may be ticked to de-risk.

<h2>What other issues are we seeing?</h2>

Obtaining planning permits is getting more and more challenging to forecast from a time/cost perspective. Local councils in the middle or outer ring of Melbourne are struggling to keep up with applications and the ability to correctly vet them. Many are simply deemed too hard in unknown GR zoned land, and have refused to let VCAT make the decision.

I’d also suggest there are some political benefits in this approach given heavy local objector groups in some municipalities. In the inner city, the backlog with the Planning Minister is still significant from all reports. Is there a risk of a bottleneck, or Melbourne becoming just “too hard”?

We might find out if overseas developers don’t make repeat purchases, or a few local developers come unstuck working to lower margins.

Local buyers are also becoming more sophisticated in every respect. Where location has traditionally been “King”, a smart floor plan is now “Queen”; and buyers want both! A one bedroom apartment can be sized at 52 sqm with an outdoor area, but if the kitchen is stuck in a dark corridor or the living space is too narrow to accommodate a couch, coffee table, and TV unit, be prepared to be left with that stock at settlement unless heavily discounted or sold wholesale.

Developers really need to push architects to create usable spaces whilst balancing yield requirements. Too often a developer can get caught up with profitability, and that is of course important. But it is also important to realize an actual profit and not carry compromised stock. Your last stock sold is often your profit.

Also, selling apartments off the plan is more sophisticated than ever before, predominantly due to the quality of 3D renders which often reflect a kitchen or bathroom buyers might have been used to seeing in “The Block”. It’s great that the marketplace is pushing quality, but this comes at a cost.

I am certain buyers expect the finished product to look like the marketing render, regardless of how many “artist impression” disclaimers might appear in the bottom corner. Everyone loves putting in some feature joinery or a nice pendant, and it should also be in the apartment at settlement.

Do I still think there are opportunities in the marketplace? Without a doubt. Samuel Property have sold two development sites (one with and one without a permit) this year, two developments have been sold out off the plan, and we’ve purchased five other parcels for development. Property is supposed to be long term and safe, whilst the stock market is supposed to be fluid and liquid.

But in the current 2015 marketplace, I see some similarities. If you intend to be active, you need to be willing to be nimble, do your due diligence, act with conviction as you read the market, and be comfortable with the high risks associated with your project.

Whatever comes in 2016, it won’t be the same as 2015.

Illan Samuel is the Managing Director of <a href="http://www.samuel.com.au/">Samuel Property</a>.
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