Closed display suites aren’t developers’ only worry
Michael Bleby

Developers in Victoria are unable to sell apartments — even in housing estates approved by the state government as stimulus measures — because the government’s lockdown measures prevent them from opening display suites.

Figures from consultancy Urbis last week showed there were just six new project launches in Melbourne in the June quarter, compared with an average of 19 every three months last year. This will not necessarily worsen the city’s housing shortage, as the expected severe drop in inward migration will offset the lower production of homes.

But even once the current restrictions ease — as they could within weeks — a tanking economy that the state government itself expects will suffer a jump in unemployment to 11 per cent, carries risks for the economy that employs some 300,000 people in construction.

Looking for sales: Pace Development Group managing director Shane Wilkinson.  Josh Robenstone

As the number of people able or confident enough to buy new homes shrinks, larger builders and developers will be able to ride out the downturn, but small- and medium-sized players will be more susceptible. If they start collapsing, it will knock on into the wider supply chain of subcontractors, consultants and professionals that rely on the sector.

“If we aren’t building houses we’re in trouble,” said economist Terry Rawnsley, the principal of consultancy SGS Economics and Planning.

Shane Wilkinson last month kicked off work on a 126-apartment project in Blackburn in Melbourne’s eastern suburbs even without reaching the presales target his Pace Development Group needs to unlock the $35 million in agreed construction funding.

The project has a 60-apartment target, and with only 26 contracts signed, Mr Wilkinson is betting that he will need to spend no more than the $5.5 million he is already outlaying for ground works and other preliminary costs.

The main bet he is making is that Victoria’s curbs on real estate activity lift soon enough to resume the marketing activities that he says are crucial for off-the-plan sales, which started on 1 August, days before Melbourne’s stage four restrictions were announced.

“Display homes are the most important thing to us. I’m hoping we can open up for inspections a lot earlier than 26 October,” Mr Wilkinson said.

“We’re betting on the fact that the HomeBuilder grant continues its momentum as soon as we can open a display suite, then get enough sales to facilitate drawing down construction funding.”

The 8700sq m Blackburn site will eventually become a $200-million-plus development with four towers – three residential and one office accommodation.

But he has not started on others, such as Pace’s 300-unit planned project in inner north-western Melbourne’s Flemington. Planning Minister Richard Wynne approved this in April along with a handful of projects aimed at stimulating an economy already at risk from the pandemic.

“I can’t market the project,” Mr Wilkinson said.

The state government approved a further five residential projects — including Gurner’s $1 billion three-tower, mixed-used development in South Melbourne — in another basket of 10 projects last week, but the industry is concerned that the market will not be able to support them.

“The impact of COVID-19 on the demand drivers for off-the-plan property have been profound,” said Danni Hunter, the Urban Development Institute of Australia’s chief executive for Victoria.

“This sector has seen a drastic reduction in migration-driven demand, investor demand and domestic purchasing power. This has led to a significantly reduced sales pipeline, exacerbated by the extended closure of sales offices and reliance on virtual interaction with consumers.”

The state government is aware of the irony.

“I know that there are still things that you want to see opened up quicker, like display villages, for example,” Treasurer Tim Pallas told an industry audience last week.

There are ways to soak up some of the existing and soon-to-be completed supply. The community housing sector, which is promoting a four-year program to build 30,000 social homes, could acquire a number of those — as long as they were in the right locations and met their standards for long-term rental assets, or could be renovated simply enough to do so.

“You may be looking at 10-15 per cent [of the 30,000] of it coming from acquisition, but it could be more depending on what is out there,” said Wendy Hayhurst, chief executive of the Community Housing Industry Association umbrella group.

But Victoria also needs to keep selling homes to keep the pipeline of flowing.

“Next year there are going to be no jobs starting and construction workers are going to be crawling over themselves to try and keep their jobs,” Mr Wilkinson said.

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Michael Bleby writes on real estate specialising in construction, infrastructure, architecture based in our Melbourne newsroom. Connect with Michael on Twitter. Email Michael at

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