Findings from the inaugural Centuria Bass 2024 Australian  Property Development and Finance Index revealed construction costs are the number one issue for  Australian developers with a clear lead amongst survey participants as the biggest development challenge, ahead of planning, site cost and high interest rates. 

Despite these challenges, the sentiment survey findings from 67 developers, investors, fund managers and  brokers showed 70% of respondents believe their project volumes will increase over the next two years. 

Nick Goh, Centuria Bass Joint CEO, said “Within the residential sector, in particular, there has been considerable debate at the Federal and State parliamentary levels about reducing planning red tape to  address the housing crisis. However, listening to our borrowers, 47% said construction costs are their  number one development challenge. 

“It seems that for project feasibilities to stack up, economies of scale need to be created through more  density in areas of high demand provided this doesn’t translate into higher land costs. So it does seem  appropriate that more planning departments are focused on Transport Oriented Developments (TOD), which  create more density in locations that support commutable communities and centralised infrastructure.” 

Residential and industrial markets were identified as providing the biggest development opportunities over  the next five years, according to those surveyed.  

Within residential, the majority of those polled (37%) nominated TODs as the biggest residential opportunity,  followed by subdivisions (28%) and luxury apartments (22%) for affluent downsizes in lifestyle areas. 

Looking ahead, respondents seemed divided on whether construction conditions will improve, deteriorate or  stay the same, with slightly more (41%) being positive about construction conditions while 35% expected a  deterioration. 

Mr Goh reflected that the borrower market is still active and there is an increasing appetite from developers  for construction loans. Survey findings support this perspective with 95% of respondents ranking  construction finance as their most common loan type over the past two years, followed by investment loans,  then an equal weighting to residual stock and bridging loans. Centuria Bass construction finance has largely  centred on land subdivisions and townhouse developments, which have proven to be more feasible due to  their lower construction costs.  

Among other findings, survey respondents said 72% of their loans are sourced through non-bank lenders, a significant increase of the past five years. 

The most common loan size is $10.1 million to $20 million and a significant majority of those surveyed (69  per cent) said their projects typically had multiple sources of funding.  

Centuria Bass was founded in 2016 and has since grown to c.$2 billion in funds under management (FUM).  Since its inception, Centuria Bass has provided compelling returns for its wholesale investors on secured  private credit loans.