City & Country: Australia’s Spec Property comes a-wooing

THE Australian property market has always been on the radar screen of Malaysians, be it for investment or migration purposes. Recognising this demand, boutique residential developer Spec Property recently set up an office, Spec Property Development (Malaysia) Sdn Bhd, in The Curve in Mutiara Damansara to serve as both a sales gallery for its products and a customer service centre.

Evans: The advantage of doing everything under one roof is that we are nimble and responsive to our market

Established in 1994 in Melbourne, Spec Property is a respected name in the city’s residential property market and has, to date, developed close to A$380 million (RM1.12 billion) worth of properties there.

“We would like the Malaysian public to know we are here as an independent developer; they are dealing directly with a developer and not an agent, and they have access to the best quality residential properties in Melbourne,” says its network manager Robert Evans via Skype from Melbourne.

The company acts as a one-stop centre, he adds. “We are an end-to-end provider. We secure our selected sites and then design, build and deliver the product.”

Other services the developer provides include property management and advocacy, for example in tenant disputes.

“The advantage of doing everything under one roof is that we are nimble and responsive to our market,” Evans explains. “We are not reliant on ideas from outside people. Basically, we have a strong team of architects, interior designers and others, which leads to greater efficiency and control of quality of our products.”

As a result, a client can buy or sell a residential unit of Spec Property as well as let it manage the property for him. Evans says Malaysian buyers will not be restricted in their purchase or sold a second-tier product from the developer’s catalogue, and buyers or investors can check the status of their units with a phone call to the Malaysian office.

Handling the Malaysian operation is its sales manager Brandon Ho, who has the sole responsibility of ensuring every client’s questions are answered.

“One of the main reasons we are in Malaysia is that we want to be close to our buyers,” Ho says. “We understand what their concerns are, having dealt with them over the years through our Melbourne office and we want to be quick and responsive to our Malaysian clients.”

Ho: One of the main reasons we are in Malaysia is that we want to be close to our buyers

Moreover, he adds, it will help speed up processes and provide further assurance to Malaysian buyers on their investment.

In the past five to eight years, Spec Property has focused on developing high-density apartments, catering for what the market needs, Evans explains. “We build for the Melbourne market; we build quality apartments in locations that have good amenities that the local people want.”

So, Spec Property selects locations that are 5 to 10 minutes away from the central business district and which are “under-utilised” and primed for urban renewal.

Eight projects, all on freehold land, are being sold at its office here in Malaysia (see table), six of which are under construction while two were completed last year. The ongoing projects offer about 400 apartments in total in South Yarra (project names: Ella and WLSN), Doncaster (Canvas), Balwyn (Andalusian) and Hawthorn (Galleria and Elmington). The completed projects are Cumulus (December 2012) in Hawthorn and Madison (July 2012) in Doncaster.

While Evans has not set a sales target for next year, he is hoping about 50 to 100 apartments will be sold then in Malaysia.

Melbourne market robust
At present, the property market in this Australian city is healthy. The Propell National Valuer’s Australian Residential Markets Report released in October states: “Over the past 12 months, Melbourne dwelling values have increased by 5.4%. Home values increased by 2.4% over September 2013 and have risen by 5% over the past three months. House values have increased by 7.3% over the past year compared to a 3.3% increase in unit values.”

While this bodes well for Spec Property’s projects, Evans points out that the appreciation levels differ from area to area. “In Hawthorn, where we have three projects, typically you will compound between 5% and 6% per annum on average. In South Yarra, where we have two projects, that is a bit stronger at about 8%.”

He says the rents and vacancies differ depending on which area one is at. “We build very much for local people, so in areas such as South Yarra, Hawthorn and Doncaster, the supply side is very well managed with vacancy rates averaging about 3% and rental growth about 3% to 5% per annum.

“By comparison, other areas in the CBD, Southbank and Docklands struggle with price and rental growth because there is a huge oversupply due to large high-rise projects.”

An artist’s impression of Ella, one of Spec Property’s new developments in South Yarra

The oversupply has raised concerns in the market. The BIS Shrapnel’s Inner Melbourne Apartments 2012 to 2019 report states that there might be an oversupply of high-rises in inner Melbourne, which will impact rents and yields. The global financial crisis created an upswing in the Melbourne inner city market, it adds, which led to improved rents and yields. However, supply is now not meeting demand, it asserts.

“The Melbourne residential market has transitioned from one with downward pressure on capital values and sales volumes to a more positive position whereby sentiment is approaching the peaks of 2010,” says CBRE Global Research and Consulting senior manager Sam Reilly in an email interview.

“Price levels for both houses and apartments are reaching historical highs and the role of the low interest rate environment is key to the present level of buyer behaviour.

“The implications of very strong development pipeline are beginning to bite, however, with stock levels showing an oversupply in some areas following the strong supply activity from 2009 onwards.  

“Despite the generally improving sentiment in the Melbourne residential market, the Melbourne CBD and fringe suburbs within 4km of the CBD, where most of the new apartment development are concentrated, recorded an increased vacancy rate of 4% in September, up from 3.7% in June. The number of listings for units has also been showing an upward trend with oversupply becoming a significant concern.”

Although the oversupply casts a shadow on the market, Spec Property believes opportunities still abound.  

“Oversupply is very subjective because even in an economic crisis, there are opportunities and there are sectors and businesses that perform well,” says Ho. “To say the whole of Melbourne is facing a residential glut is an oversimplification. The city’s population is growing by 70,000 to 80,000 per annum but buyers need to be wary of the size and location of the projects. It all boils down to the fundamentals.  

“The vacancy rates in Southbank, Docklands and the Melbourne CBD are, admittedly, hovering at about 22%. This is largely because huge towers in Southbank were purchased by ill-informed overseas buyers or speculative non-residents; the locals rarely buy there unless the projects are very notable.

“That is why Spec Property develops in prominent low-density areas such as South Yarra, Hawthorn, Balwyn, Hawthorn East, Doncaster and North Melbourne for the local market. These are the Bangsar, Hartamas and Damansara of Melbourne. A good local developer is the best option for a Malaysian buyer to associate with.”

This article first appeared in The Edge Malaysia Weekly, on December 9, 2013.

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