Reports of an upsurge in collective sales have not been as prevalent in media titles, although many site sales are currently grown behind closed doors, on average two to three years before being sold to the public.
Knight Frank's research shows that group sales can include horizontal sites, with multiple owners joining together to form merged residential super lots; and vertical sites in a building, including owners of individual apartments and offices.
In 2017/18, group sales accounted for 16.5% of all sales at sites suitable for low, medium and high density development in Australia. It's seven times more than five years ago!
It is quite common for non-market transactions and extended settlements to be forfeited for up to two years for this type of purchase. It is therefore likely that additional sales have been recorded over the past year and that it will therefore be necessary to backdate once the settlement occurs. This could bring collective sales above the 20.4% recorded in 2016/17.
Since the new legislation governing strata properties came into effect at the end of 2016, sales of vertical sites are more prevalent at NSW. The reforms offer owners of lots of freehold strata another way to end their ploy. This can be done by accepting a plan for the collective sale, or redevelopment, of their strata complex under circumstances where not less than 75% of the owners agree. As a result of the reforms, these sales increased from 3.8% in 2014/15 to 17.3% in 2017/18 of total sales on sites suitable for high density development.
A similar diaper reform was recently adopted by the Washington State government to encourage the modernization of buildings whose potential has not yet been fully exploited and to limit urban sprawl . Although regulations still need to be developed for this new reform, it is understood that a requirement of 80% of homeowners in a system of five lots or more must vote for the state administrative court to determine if the system satisfies to all requirements in order to: be terminated.
In Victoria, the share of collective site sales in value has decreased each year since 2014/15. The relative value of development sites in Melbourne is still favorable compared to Sydney and there remains a good mix of sites available in the suburbs of the proposed city. At this point, Victoria avoids the need to explore different types of reforms.
Bypassing this trend, although the Queensland development sites have relatively better prices than in these two states, collective sales at higher densities have continued their upward trend since 2015/16. This result is a mix of old downtown Brisbane apartments ready to be redeveloped and the sale of secondary office suites on a single line, the latter reflecting the weakness of the office market with high vacancy rates in recent years.
Foreign buyers and local buyers represented a relatively balanced figure of horizontal and vertical collective sales in the last year compared to previous years.
Michelle Ciesielski
is the head of
residential research at
Knight Frank Australia
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