Townhouse developers buy up central Christchurch land as confidence returns to the market

Confidence is returning to the Christchurch residential development market, with recent transactions indicating renewed demand among developers for townhouse sites.
CBRE investment sales associate director Cameron Darby says developers are taking encouragement from the more positive economic and property market sentiment that is emerging in 2024.

“Following a challenging 18 to 20 month period from the beginning of 2022 through to late 2023, residential developers are now actively returning to the market and seeking out suitable development sites,” he says.

“Value growth in the residential market in Christchurch, expectations of interest rates levelling off and eventually decreasing, as well as positive population growth forecasts are all contributing to developers regaining the confidence required to bring new product to market.”

Notable land transactions concluded at the end of 2023 include two residential development sites at 888 and 867 Colombo Street, located just to the north of the city centre. Both sites were sold to prominent townhouse developers following open-market sales campaigns, receiving multiple offers.

At nearly 9,000sqm, 888 Colombo Street is one of the largest sites to change hands in central Christchurch since the earthquakes.

It was purchased by prominent Christchurch-based developer Growcott Freer Property, said Tim Rookes, Managing Director of CBRE Christchurch. “This site was one of the last remaining large development land parcels in central Christchurch and is significant as one of the largest single land holdings to be sold in the central city post-earthquake.”
“This is a highly strategic acquisition for Growcott Freer and presents an excellent opportunity to plan and execute a residential development of considerable scale.”

Isaac Freer, Director of Growcott Freer, said the company has a positive view on the long-term dynamics of the central Christchurch residential owner-occupier and investment markets.

“Migration and population growth trends point to the demand for living and investing within the four avenues continuing to increase. Further positive growth drivers include the national reputation of our rebuilt CBD and the upcoming completion of major anchor projects including Te Kaha stadium.

“We look forward to commencing work on-site at 888 Colombo Street in the near future, which will be our biggest development to date with 72 homes. Acquiring this site enables us to scale up our presence in central Christchurch, complementing our 25-unit development nearby at 248 Manchester Street.”

Christchurch’s population is expected to grow from 396,200 in June 2023 to 448,000 under a medium-growth scenario and 514,000 in a high-growth scenario by 2048, according to Stats NZ.

867 Colombo Street is a 949sqm block which was sold to Brooksfield, following strong interest from multiple potential buyers during the marketing campaign, said Darby.
“We’re seeing particularly strong participation from buyers in well-located, small to medium-sized development sites of between 500 and 2,000 square metres. This is a sweet spot in the market where a large number of players from small private developers right up to national homebuilding groups are becoming increasingly active.”
Both sales illustrate the increasing demand for central Christchurch development land, as developers seek to secure sites now to meet expected buyer demand as interest rate pressure eases, he said.

“Developers are emerging from a tough period where rising construction costs, weakening sale prices of end product, home buyers leaving the market and high costs of borrowing challenged the viability of many projects.”

“With more positivity on the horizon, we expect transactions of residential development land to pick up again in 2024 as developers who held off buying new sites over 2022 and 2023 begin to re-enter the market and compete for suitable sites.”

Both sites are located within the four avenues, in zone for Christchurch Boys’ and Girls’ High schools and within walking distance of key amenities and attractions including Hagley Park, Victoria Street, the CBD retail precinct, Margaret Mahy Playground and the Town Hall, making them ideal for residential development, Darby said.

The new government’s upcoming decision on potential changes to proposed medium-density residential standards (MDRS) rules may also impact the development land market in Christchurch, by reducing the future supply pipeline of medium-density land if a watered-down proposal is introduced.

The previously-announced MDRS programme would require larger councils to enable three homes of up to three storeys on most residential sections as well as greater heights and densities in and around commercial centres.