Melbourne tycoon Eddie Kutner calls for supply side incentives

The Focus Apartments in Southbank by Central Equity.

One of Melbourne’s leading high-rise developers, Central Equity, has urged further reforms to stimulate housing supply amid ongoing difficulties in getting projects off the ground.

The private company, which turned in a $16m profit before tax on revenue of $87.5m, warned that the industry was predicting further shortages of apartments as a result of lower starts, which it said would eventually underpin higher sales prices.

Central Equity said it had adopted a risk management approach in the wake of the pandemic, which has hit its home market of Melbourne particularly hard. It has built out its apartment development pipeline and is selling out its completed stock.

This strategy had effectively de-risked its financial position and left it with substantial funds on hand to shift into residential development as well as widening out its activities. The company’s founders have separately pushed into retail property and flagged that the company would look beyond Victoria for opportunities.

Central Equity has a development in Northcliffe at Surfers Paradise which was approved in September. It is quietly sounding out buyers for a new tower on the Gold Coast site that it had put on hold three years ago. It had put the Pacific One project, a 56-level tower, on ice as building costs jumped. A 52-level tower is now planned as the Queensland market shows signs of trading strongly. However, Central Equity warned its remaining apartment development site pipeline was under review both in terms of design and sizes. It said this would ensure that as projects were released they would respond to demographic trends, demand and economic conditions.

“As a consequence, the group has substantial funds available to deploy in residential development as well as broadening its activities,” chairman Eddie Kuttner said in the company’s accounts.

He highlighted the supply side crisis that is prompting problems in the housing market and called for governments to act on the predicament.

“Federal and state governments recognise the shortage of residential accommodation and the high cost of rental,” he said.

“To achieve their targets, supply side incentives and further streamlining of regulations are required to encourage construction of dwellings. New residential construction is a vital component of both the social and economic fabric of our society, with the potential to create a significant number of jobs and contribute to the economy. Residential development supports significant industries such as education, tourism and the health industry.”

The tycoon added that only supply side policies would ensure an acceleration of new product, which would have the dual purpose of satisfying demand and ensuring that price increases are ameliorated.