Reflecting on 2024: a year of momentum and challenges in Australian residential development
Residential market performance
The Australian residential market in 2024 presented a mixed landscape, with national home price growth reaching 5.53% by November. However, significant regional disparities shaped the narrative across our key markets:
Sydney: Annual home price growth reached 4.6%, although the market softened toward year-end, with prices declining 0.6% in December. Auction clearance rates fell below 65%, reflecting buyer constraints amid persistently high property prices and interest rate uncertainty.
Brisbane: A standout performer, Brisbane recorded a 12.6% annual price growth. Prices rose 0.5% in December, supported by population growth and continued demand for housing.
Melbourne: Struggling with economic headwinds and supply overhang, Melbourne experienced a 1.6% annual price decline. December saw prices dip further by 0.7%, compounded by subdued demand and the impact of investor-led selloffs.
These dynamics played out against a backdrop of high interest rates. The Reserve Bank of Australia (RBA) maintained the cash rate at 4.35% throughout 2024 — the highest level in over a decade — creating challenges for buyers and developers alike.
The recently announced reduction in the cash rate to 4.1% will not have a material impact on the feasibility of new developments but it will improve purchaser sentiment — particularly first home buyers.
At a macro level the supply/demand equation for residential development remains positive across the majority of markets supported by limited new supply and strong population growth driving demand.
Private credit trends
Amid regulatory changes and a structural housing shortage, private credit continues to bridge the gap left by traditional lenders:
Banks have continued to reduce exposure to residential construction driven by more regulation on the banking sector, changes in bank capital rules, and greater focus by the banks on vanilla lending opening opportunities for private credit to provide flexible financing.
Increased demand for commercial real estate financing highlighted the appeal of private credit solutions in challenging market conditions.
Spotlight on Solido funds
A year of strategic growth
Building on momentum from 2023, Solido had its second highest year in dollar value of transactions.
Performance highlights:
Since 2019 when Solido first started investing on behalf of external investors, the company has delivered average net investor returns on all realised investments of 8.6% per annum.
To ensure a strong alignment of interest between Solido and investors, the firm continues to co-invest 15% in all loans from our balance sheet.
Successful completion and repayment of key projects, such as the Elsternwick Project in Melbourne, where a $70m construction facility, co-financed with Dexus, was repaid in full.
Notable new projects
Mosman, NSW: A $19.9m construction facility over 30 months for three luxury apartments overlooking Sydney Harbour.
Indooroopilly, QLD: A $12.1m facility to finance nine residential apartments across six levels, with an 18-month term.
Dee Why, NSW: A $24.26 construction facility over 8 months for 21 luxury apartments within close proximity to Dee Why Beach.
Austral, NSW. A $12.137 million site acquisition loan for a proposed subdivision of 13 residential lots. The loan is for a term of 18 months.
Team expansion
To support our growth and the launch of new funds, we grew and strengthened our team:
James Quigley was appointed Fund Manager in September 2024, leveraging over 25 years of expertise in property and funds management at major national and international property and investment firms including Lend Lease, Mirvac, Morgan Stanley and LaSalle Investment Management. James has a proven track record of successfully managing and repositioning portfolio’s, growing portfolio’s and funds under management, delivering strong returns for investors and completing major transactions. James is responsible for launching and marketing our new funds and liaising with investors in regard to fund-raising.
Dominik Dumaine joined as a credit analyst also in September. Having started his career with Deutsche Bank in M&A, Dominik has had over 20 years of buy-side experience since, primarily covering high-yield bonds and leveraged loans both internationally with Citigroup and BNP Paribas Asset Management as well as locally with AMP Capital and FC Capital. Dominik will help on business and asset modelling & structuring, on enhancing our credit review processes and support the launch of our new funds.
Philippe Roger joined in October as an Advisory Board Member. Having been an early investor with Solido, Philippe brings nearly three decades of experience and expertise in structured credit, notably having been previous Global Head of Structured Credit at JP Morgan and part of the Executive Management at UBS. Philippe’s advice will be focused on product development as Solido prepares for its next stage of growth.
David Woolford joined in January this year as an Advisory Board Member. David has over 35 years experience in the real estate industry across all real estate asset classes. During this time he was CEO of Knight Frank, Australia and Cushman and Wakefield. More recently David was a Divisional Director at Pepper and a founding partner at Capstra. He has an extensive network throughout the industry and will bring valuable expertise and insights as Solido continues to grow.
Outlook for 2025
Market trends
Inflation is gradually falling but remains at the upper end of the RBA's target band, and unemployment remains low.
After a small decline in late 2024 property prices have stabilised in Sydney and Melbourne. There are early signs of new home buyers returning to the market following the recent rate cut.
While the RBA cut the official rate in February, rates are likely to remain elevated for the balance of 2025.
Buyer preferences are shifting:
Many buyers are downsizing or moving to more affordable areas due to tighter credit conditions.
As a result of the significant price gap between established homes and apartments in most markets, buyers are increasingly looking to purchase apartments as the more affordable option. Many forecasters are predicting stronger price growth for apartments compared to houses over the next few years as result of this market dynamic.
Retiring baby boomers are driving demand for high quality inner city apartments and coastal properties and continue to help their children enter the property market – the bank of Mum and Dad.
Challenges for developers
Construction costs remain high although the pace of increase is declining.
Declining building commencements and state government policies are constraining new supply.
Regional insights
Sydney: High construction costs and land values make mainly high end developments viable, supported by downsizer demand. Planning reforms and housing affordability initiatives remain critical.
Melbourne: Despite incentives like the off-the-plan stamp duty concession, demand remains weak, with constrained supply expected in the coming years, although there are emerging signs of improving buyer demand.
Brisbane: Strong population inflows and limited stock continue to drive demand, though the construction market remains a challenge due to a reduced number of residential builders, several major infrastructure projects and the Olympics.
Opportunities for Solido
Continue to partner with established developers with strong track records to deliver high quality residential developments across the Eastern seaboard.
Leverage our deep property development experience and extensive network to deliver funding solutions across the capital stack – from senior loans through to JV equity partnerships.
Work with developers to create alternative exit strategies and funding solutions for new projects including affordable housing, build to rent and co-living.
Conclusion
As we look ahead to 2025, private credit and equity remains a vital enabler of Australian residential development. At Solido, we are committed to navigating the evolving market landscape with discipline and agility, ensuring strong returns for our investors while supporting the development of much-needed housing across NSW, QLD, and Victoria.
Unlike many of the larger non-bank lenders we continue our track record of no losses for our investors and remain focussed on capital preservation above all else.
For more insights or to discuss further investment opportunities, feel free to contact us. Together, we’ll continue building the future.
Reach out to our team for more information our project finance.
Beau and Mike
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