COVID-19 pandemic likely to impact near-term supply and long-term design of housing in Australia and around the world
- Knight Frank has released the results of a survey of 160 global developers across 22 nations including Australia
- The survey found almost six in 10 global developers have delayed projects in response to the spread of the virus
- Of those with delayed projects, more than four in 10 are now making changes to designs that were once considered complete
- The survey confirms a desire to consider potential COVID-19 inspired changes, including space for home offices, healthier and greener living, urban appeal, mixed-use schemes, closer to home and virtual viewings
- Funding is seen as the biggest barrier to global development for developers
- In Sydney, completion of high-density schemes this year is forecast to be almost 60 percent lower than delivery in 2019, which itself was six percent below the 2018 level
- Branded residences, such as Crown Residences at One Barangaroo, have seen a surge in popularity over the last 20 years and the pandemic has highlighted some of the advantages of such developments
17th September 2020 – Australia – COVID-19 could impact the near-term supply and long-term design of housing around the world, according to research released today by Knight Frank.
A survey conducted by Knight Frank amongst 160 global developers across 22 nations including Australia, found almost six in 10 global developers have delayed projects in response to the spread of the virus, as it broke down supply chains and prompted a wholesale rethink of how and where people want to live.
Of those with delayed projects, more than four in 10 are now making changes to designs that were once considered complete.
Knight Frank’s Head of Residential Research Australia, Michelle Ciesielski said:
“While it is still too early to confirm the lasting impact of the pandemic on the development landscape, it is clear that it has accelerated emerging trends and prompted new ideas for current and future developments.
“While developers will likely temper their urge to radically reshape development designs initially, what cuts through the findings of the research is the importance of not overreacting to the immediate fallout from the crisis.
“There is little evidence pointing to the need to design for future lockdowns or specified meterage for social distancing.”
Knight Frank’s survey confirms a desire to consider potential COVID-19 inspired changes, including:
- Space for home offices: Three-quarters of developers are more likely to consider advanced telecommunications and space for home offices to allow for continued flexible home working
- Healthier and greener living: 38 percent of developers are more likely to consider facilities for bicycles, compared to only 17 percent that are more likely to consider parking space availability
- Urban appeal: Whilst 41 percent of respondents said they would be looking to develop in a mix of locations, cities, second-home and rural areas, 45 percent said they were more likely to solely focus on cities
- Mixed-use schemes: A third of developers are considering adjusting the mix of residential and commercial elements in schemes, from rentable desk space and individual pods to business suites
- Closer to home: Following a period of unprecedented restrictions on movement, two in five developers said they would be more likely to be sensitive to the requirements of the domestic market
- Virtual viewings: Almost two-thirds of respondents see sales geared towards virtual offerings from now on. This enables a more inclusive sales process with buyers able to have the architect or designers speak directly to them, via webinars for example, enabling more interaction with the developer and a better experience
With housing delivery a high priority in many markets, the research also examined some of the biggest constraints that developers are facing.
“According to our survey respondents, funding is the biggest barrier to global development, with just under a third citing it as their biggest concern, followed by market regulation via taxation, then the hurdles that come with planning,” Ms Ciesielski said.
“Some global markets, including Sydney, have seen a reduced number of lending facilities offered to developers. At the moment there is decreased bank appetite for developer lending and in some markets the pre-sales requirements make it hard to begin construction.
“Supply constraints are likely to be exacerbated by the disruption faced during the pandemic. Across the seven key markets*, on average, supply is forecast to grow by just one percent in 2020, though this will largely be driven by Hong Kong and Dubai, where the forecast increase in new homes being delivered is 53 percent and 40 percent respectively.”
Knight Frank National Head of Residential Shayne Harris said:
“Considering 57 percent of our global developers have delayed their projects, we could see fewer than forecast being completed and see an overall drop – akin to those already being experienced in cities such as Sydney, Singapore and London.
“In Sydney, completion of high-density schemes this year is forecast to be almost 60 percent lower than delivery in 2019, which itself was six percent below the 2018 level. Given supply continues to be constrained, this is likely to underpin pricing and potentially soften the headwinds on the horizon.
“COVID-19 has negatively impacted property prices to differing extents, depending on the prevailing dynamics in each city.”
The Knight Frank Prime Global Cities Index, which tracks prime** property prices in 45 cities, climbed 0.9 percent during the year to Q2 2020, the lowest rate of growth since 2009. Prices declined two percent, on average, across the seven key markets* although Sydney recorded three percent growth over this time.
“Some of these global markets had already experienced large corrections over the past five years – where the Sydney prime market saw the largest growth of 38 percent. In fact, Sydney coming from a lower price point, was also the standout performer over the past ten years with the prime luxury market growing by 73 percent,” Mr Harris said.
Branded residences have seen a surge in popularity over the last 20 years and the pandemic has highlighted some of the advantages of such developments. From the lock up and leave element to the stringent maintenance procedures offered by foremost hospitality providers. The sector may face some challenges in the wake of COVID-19, but is likely to evolve in new and interesting ways.
Knight Frank’s Erin van Tuil, Partner, Crown Residences at One Barangaroo said: “The ‘lifestyle revolution’ that is occurring will bring with it opportunity for branded residences, especially where relative value, best in class product or safe haven status can be demonstrated.
“Marketing Crown Residences at One Barangaroo we have witnessed first-hand increased demand from buyers for this calibre of home, especially since the pandemic. Those looking to purchase inside Australia’s first fully-integrated hotel branded residences are drawn to aspects such as access to unrivalled serviced living and amenities, proximity to greenspace and the harbour, all while still being in the city. All of this demonstrates that branded residences could outperform rural and coastal locations.
“Sydney has emerged on the global stage for luxury home offerings and the wealthy are looking for that next level of luxury living. This is why the development of homes such as Crown Residences at One Barangaroo have come to fruition. The record sales achieved at the Residences are testament to this demand,” concludes van Tuil.
*Seven key markets include Dubai, Hong Kong, Prime Central London, Madrid, New York (Manhattan), Singapore and Sydney
**Prime Property is considered the most desirable and most expensive property in a given location, generally defined as the top 5% of each market, by value. Prime markets often have a significant international bias in terms of buyer profile.