Australia’s Property Market Has Changed however Profitable Development Hasn’t Disappeared
Australia’s property development market has changed.
Higher construction costs, tighter lending conditions, increased finance costs, planning complexity and changing buyer expectations have created a very different environment for developers compared with only a few years ago.
But a changing market does not mean development opportunities have disappeared.
It means the way successful property developments are structured, funded, managed and brought to market needs to change with it.
Across Australia, viable and profitable development opportunities still exist. The difference is that today, there is considerably less room for inefficiency, poor planning or decisions made in isolation.
At 756 Group, we work across Project Management, Planning & Development, Acquisition and Private Development Funding, helping developers navigate the entire development lifecycle and position projects for commercial success from the outset.
The Australian Property Development Market Has Shifted
Property development has always involved balancing opportunity with risk. In the current Australian market, however, developers are managing pressure from multiple directions.
Construction and labour costs have increased. Traditional lending criteria can make securing development finance more difficult. Holding and funding costs can quickly affect feasibility when projects are delayed. Planning and approval processes remain complex, while purchasers have become increasingly discerning about location, product, price and quality.
A project that appeared profitable based on assumptions made two or three years ago may therefore produce a very different result under today’s conditions.
This is why development decisions can no longer be considered independently.
Acquisition affects feasibility. Feasibility affects design. Design affects construction costs. Funding affects holding costs. Marketing affects sales velocity. Sales affect cash flow and ultimately determine the project’s profitability.
Every component is connected.
Profitability Starts Before Construction
One of the most important principles in successful property development is that profitability isn’t created at settlement.
It begins at the very start of the project.
Before acquiring a site or committing significant capital, developers need a clear understanding of the complete commercial picture.
What can realistically be developed? What will it cost? What does the market want? What can the finished product sell for? How will the project be funded? What are the likely timeframes? Where are the risks? And critically, what happens to the project’s return if costs increase, approvals take longer or sales prices change?
These questions need to be considered together.
A strong development strategy connects acquisition, planning, feasibility, design, funding, project management, marketing and sales around a single commercial objective.
That objective is not simply to complete the project.
It is to complete a project that sells, generates an appropriate return and protects the developer’s ability to move confidently into the next opportunity.
Why Developers Need More Than Development Finance
Access to capital remains a critical component of property development, particularly as traditional lending environments become more restrictive.
Private development funding can provide developers with alternative pathways to progress viable projects, but finance should never be viewed in isolation.
The structure, timing and cost of funding can have a substantial impact on the overall development result.
At 756 Group, our involvement extends beyond helping developers access private funding. We look at the broader project and the commercial factors that ultimately determine its viability.
That means asking the questions that matter before problems become expensive.
Can the project support the proposed debt structure?
Are construction costs aligned with the feasibility?
Does the development program provide sufficient contingency?
Is the proposed product aligned with buyer demand?
Can marketing and sales commence at the right stage?
Are decisions being made with the project’s final margin in mind?
The objective is to create a development strategy in which capital supports the project rather than becoming another source of pressure within it.
Managing Costs Without Compromising the Development
In today’s market, cost management is fundamental.
However, effective cost management does not simply mean selecting the cheapest option.
Poorly considered cost reductions can affect design quality, marketability, construction timeframes and ultimately sales values.
Instead, developers need visibility across the project so decisions can be assessed according to their effect on the overall commercial outcome.
Through effective project management, procurement, consultant coordination, program management and ongoing feasibility analysis, potential cost pressures can be identified earlier and addressed before they materially affect the project.
The earlier these decisions are made, the greater the opportunity to protect margin.
Design the Project for the Market – Not Just the Site
A development can be technically feasible without necessarily being commercially successful.
Understanding what can be built on a site is only one part of the equation. Developers also need to understand what should be built.
Who is the target purchaser?
What product are they looking for?
What price point can the market realistically support?
Which design features will influence their purchasing decision?
How does the proposed development compare with competing projects?
These considerations should influence a project long before construction begins.
When market positioning, product design, feasibility and sales strategy are considered together from the outset, developers can create projects that aren’t simply compliant with planning requirements, they are designed to sell.
Marketing Shouldn’t Begin When Construction Is Finished
Marketing is sometimes treated as one of the final stages of property development.
In reality, it should influence decisions much earlier.
A successful sales strategy begins with understanding the eventual purchaser and ensuring the project’s product, positioning, pricing and presentation are aligned with that market.
Early consideration of marketing can also support pre-sales strategies and provide valuable market feedback before significant construction expenditure has occurred.
Rather than asking, “How do we sell what we’ve built?”, developers should be asking much earlier:
“What should we build that the market will want to buy?”
That distinction can have a significant impact on sales velocity and overall project performance.
The Importance of Having One Partner Across the Development Lifecycle
Property development involves a large network of professionals; planners, architects, engineers, builders, financiers, marketers, sales agents and consultants.
Each may perform their individual role extremely well.
The challenge is ensuring everyone is working towards the same commercial objective.
Without coordination, decisions made in one area can unintentionally create problems somewhere else.
A design change may increase construction costs.
A planning delay may increase finance and holding costs.
A funding condition may affect the construction program.
A product decision may reduce buyer demand.
A marketing strategy introduced too late may affect sales momentum.
This is why having an experienced development partner working alongside the developer across the lifecycle of the project can be so valuable.
At 756 Group, we bring together Project Management, Planning & Development, Acquisition and Private Funding with a focus on the project’s complete commercial outcome.
Rather than looking at individual components in isolation, we work with developers to understand how each decision affects feasibility, risk, timing, sales and profitability.
Protecting More Than the Margin
For experienced developers, the success of a project is about more than the profit generated by one development.
It is also about protecting reputation, relationships, capital and the ability to undertake the next project.
A poorly structured development can consume significant capital and management time, affect relationships with investors and financiers and restrict a developer’s ability to pursue future opportunities.
A well-managed development can do the opposite.
It can strengthen a developer’s track record, create confidence among funding partners and purchasers, preserve capital and establish the platform for future projects.
That is why project viability should always be considered beyond the immediate development.
The question is not simply:
“Can this project make money?”
It should also be:
“Does this project strengthen the developer’s position for what comes next?”
Opportunity Still Exists Across Australia
Despite the challenges facing the Australian property market, demand for quality housing and well-positioned development has not disappeared.
What has changed is the level of discipline required to convert an opportunity into a successful project.
Developers need stronger feasibility analysis.
They need greater cost control.
They need funding structures appropriate to the project.
They need planning and project management expertise.
They need to understand their target market earlier.
And they need each of these elements working together rather than independently.
The projects most likely to succeed in the current environment will not necessarily be those with the largest budgets or the most ambitious designs.
They will be the projects where commercial thinking is embedded into every decision from acquisition through to settlement.
Build the Right Project. Structure It Correctly. Manage It Commercially.
Australia’s property market has changed, and development strategies need to change with it.
For developers with the right site, a realistic feasibility, appropriate funding and an experienced team around them, there are still opportunities to create profitable and commercially sustainable projects throughout the country.
At 756 Group, we work alongside developers throughout the development lifecycle, from acquisition and early feasibility through planning, development, project management, funding, marketing considerations and delivery.
Our focus is simple: helping developers make informed decisions earlier, manage risk and costs throughout the project, and position developments for successful sales and sustainable profitability.
Because in today’s property market, securing funding or obtaining an approval is only part of the equation.
The real objective is delivering a project that works commercially from the first decision to the final sale.
Talk to 756 Group About Your Next Development
If you’re considering a new development, reviewing the feasibility of an existing project or exploring private funding options, speak with 756 Group about how your project can be structured and managed for today’s Australian property market.
