By close of business on Wednesday, 30 would-be buyers of The Commons apartments in Hobart’s CBD will know if their ballot entries are successful and they’ve won a chance to buy into what’s possibly the most hotly contested housing model in the country.
That’s if the 3000-plus people on the waiting list to buy Nightingale apartments are anything to go by.
The Commons isn’t quite Nightingale but it’s the housing model that gave birth to Nightingale, and its closest relative. See our report on The Commons, version 1, in Melbourne’s Brunswick, from 2012.
According to Clint Hare, general manager of Small Giants Developments, part of the huge Almagor/Lieberman investment empire that also owns Impact Investment Group, The Commons Hobart might be a commercial development, but it still has a mission to spread good practice.
The highest sustainability standards are a given, just like in Nightingale. So there’s no airconditioning, it has communal laundries, a community garden, just three share parking spaces and a nine star natHERS rating.
But the project will go further. Hare says the intention, like Nightingale, is to influence market behaviour.
“That includes providing information on the development so others can look at it and realise, hopefully, that it’s profitable, though not excessively, and go ahead and replicate what we’re doing better.
“So getting better outcomes for the environment and the community.”
Ballot method of sales
The ballot method wasn’t the agent’s idea of happy marketing, but Knight Frank’s department manager project marketing Matthew Chugg went along with the concept anyway.
We spoke to him on Monday but even then he estimated that judging by the social media, the local newspaper-led interest and the architect’s and developer’s reach would see about 35 people vie for the privilege of purchasing one of The Commons units.
Asking prices for the Core Collective designed apartments are between $350,000 for a single bedroom apartment to $815,000 for a three-bedroom apartment.
So what does he think of the ballot method of finding buyers?
“It’s a first for me and a first for anyone in Tasmania, I would have thought. We wanted to move away from conventional agency.”
The value of the method means there is “no price bidding, no gazumping”.
Marketing has been by word of mouth and direct contact through existing networks of the agent, the developer and the architect, and through social media.
Prices by comparison are modest, Chugg says.
“One of the reasons is it’s about creating a diverse community.”
A new market niche for Hobart
According to Small Giants Developments Clint Hare the project would have seriously struggled to find finance 12 or even six months ago.
Double-digit property price rises in the city’s most southern capital have made a big difference to confidence in the city, but so has the rise of alternative housing projects such as The Commons and Nightingale.
In the last two or three years this alternative model of housing has rocketed around the country like an idea that was well passed its due date.
What’s so appealing, it seems, is its departure from conventional thinking. Instead of rampant profit, there’s a keenness to restrict margins; instead of how many units you can pack onto a site, it’s about building communities.
Hare says the response to the project has been overwhelming.
“The design presentations were sold out three times and more sessions had to be arranged”.
Initially there was a bit of reticence. The predictions were that Hobartians would not be as receptive to increased densities as Melburnians or Sydneysiders.
But instead the response was “quite incredible”.
“As we started to refine the design and how the floor plans were going to look interest was strong and they were trying to outbid each other before we even set prices.
“And that’s not part of our objective.”
So it was decided to use a ballot system as a way to a fair outcome.
There was also a desire to stimulate diversity.
“We want to create housing for people who need housing; create diverse communities.”
So for these reasons it was decided not to preclude people who rent, so unlike Nightingale where investors are precluded, some investors may well end up owning a Commons apartment, but a minimum of six month rentals will be part of the caveat.
Hare also says that a community manager has been employed, which achieves two ends: starting the notion of building a community to “bring attention to the Commons rather than go over the top with advertising and what we’re trying to achieve.”
So how did the funding challenge go?
A recent article published by The Fifth Estate on the latest Nightingale project in Melbourne cited banks insisting on a minimum of 17.5 per cent profit margin.
So what was the attitude of the banks for this type of development in Hobart?
“Our feedback from the bank is that 20 per cent is safe.”
But, he points out, “all banks are different and markets are different”.
For instance, there was “very little appetite from the banks to support this proposal at its inception, but fast forward six to 12 months and there’s a lot more appetite”.
Chugg says there have been significant changes in the local market in recent times.
“The Hobart market has been quite a traditional market, but it’s seen a real shift to apartment living in the past two years,” he says. And The Commons caters to the strong interest in sustainability.
“Sustainability is important in the local market. People are absolutely caring about it. Hobart and Tasmania in general care about the environment. I think we’ve recognised our beauty, and tourism has overtaken agriculture and forestry.
“There’s a new appreciation about where we live.”
Chugg says interested buyers have come from a wide cross-section, from first home buyers to professional couples and investors.
The market is definitely hot, he says.
“You’d have to have been on the dark side of the moon to not know that this market is crazy.”
And with any luck The Commons will pick up on that appetite with some solid results for sustainability.
Prices in Hobart increased by 13.6 per cent for the 12 months to August according to CoreLogic.