Lenders slashing key hurdle to unlock Geelong’s apartment boom

The bar to getting more apartment projects out of the ground in Geelong appears to be shifting.

The city’s apartment market has remained in a state of flux as an increasing number of projects win planning approval, but have yet to progress to sales or construction.

At the heart of the matter is the impediment between the cost of construction, the ability to secure finance against what apartments can be sold for in the city.

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Matt Deledio, who has joined CBRE’s strengthened Victorian Debt and Structured Finance team in its Geelong office, said the development landscape is improving on the finance front while confidence in the region’s future was rising.

“Most people usually point the finger at a local council and planning issues, but council has actually been pretty proactive in terms of increasing densities and trying to create as much opportunity as they can,” Mr Deledio said.

But major lenders may be opening the door by lowering the bar on apartment pre-sales.

“Historically it would have been 80 per cent of the construction costs in pre-sales,” he said. “They’re now lowering that to 25 per cent or 50 per cent – that’s a pretty substantial hurdle that they’re lowering, just to try to encourage people to construct.

Matt Deledio heads the Victorian Debt and Structured Finance team from CBRE’s Geelong office.

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“We’re seeing a real move to try to accommodate that pre-sale requirement to give some developers some comfort around the fact they can deliver these (projects),” he said.

“Obviously there needs to be some feedback that the sales are thereabout and there is some traction in the market.”

Mr Deledio said while Geelong’s apartment market was still in its infancy as most buyers preferred the established detached housing sector, developers can significant growth ahead.

“It’s more that the fundamentals of the market are quite strong. There’s a lot of investing going into the local market and there’s a lot of population growth moving forward that, coupled with the product, or the growth of a particular pocket.”

An increasing downsizing trend among older demographics was feeding part of the demand.

“I think you see a lot of people moving toward that well located, really well appointed and well-built apartment complex,” he said.

Construction of the Motif apartment project at 1 York St, Geelong, has been completed.

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Recent apartment projects built in Geelong included the Motif building on York St, where a significant portion of pre-sales were out-of-town investors, and the Pitard Group’s 11-storey, 117-apartment complex at 23-25 Myers St, which the Melbourne-based development group has started the process to transfer ownership to National Affordable Housing Victoria.

Developers of the city’s first vertical retirement village, Bellevue Geelong, are preparing to launch sales for the project in March, while mixed use projects such as Monno’s Moorabool and Up Property’s Malop St developments have won planning approval. Gurner has indicated its Brougham St mixed use project could be launched this year.

Mr Deledio said developers can see the real upside to a growing apartment market, based on population growth.

“I think the council have really revealed their hand in a positive way, trying to say that we want this to happen, which has been excellent,” he said.

Pre-sale marketing has started for Geelong’s first “vertical retirement village” at Bellerine St, Geelong.

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“That gives developers a pretty strong level of confidence that they know what’s not going to be a major hurdle.”

Construction costs remain an issue, along with the reality that it costs the same to develop a project in Melbourne or Geelong, but dwellings were cheaper in the latter.

“It’s going to be product dependent because you’ve still got pockets within Geelong where you can get that premium price for apartments,” he said.

“It still comes down to what you’re paying for the site, but also who you’re appointing to actually construct it. I think there’s confidence now that it’s stabilised and if people are buying in there right pockets for the right product, I think it’s still always going to sell and developers will still be able to make a margin.”

Gurner has indicated its Brougham St, Geelong project, could be launched in 2026.

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Mr Deledio joins CBRE after six years as senior development manager at Costa Property Group and brings an in-depth knowledge of the property industry across Geelong and Melbourne.

“I’m looking forward to partnering with local developers, commercial property owners, agribusiness operators and established businesses seeking to structure, optimise or expand their debt strategies as the region continues to grow and evolve,” Mr Deledio said.

“Geelong is experiencing significant growth across population, employment and major commercial development, creating strong demand for sophisticated capital solutions. It’s already an exceptional place to live and do business, and with the scale of investment underway across the region, Geelong is well positioned for continued commercial and economic expansion.”