on 27/9/2018
While Australians are looking for more convenience and a low-maintenance environment, they still want modern comfort and plenty of room. Developers respond to this buyer profile by building more rooms in the apartments.
The proportion of three-bedroom apartments under construction is expected to increase by 42% for high-density projects currently under construction or planned in the next four years, compared to those built in the last four years in major Australian cities. Sydney, Melbourne, Brisbane, Perth and the Gold Coast.
With regard to the bedroom configuration of apartment projects in these cities, the proportion of two-bedroom rooms built between now and 2021 will increase from 43% to 48% and that of 10% to 14%.
The number of four-bedroom apartments will increase from 0.4% to 0.8%. Over this period, the share of studios should decrease by half, from 8% to 4%, and that of bedrooms from 39% to 33%. As a medium-density housing option, townhouses have interesting features and are gaining popularity: they may have a dedicated back yard and, although they are attached to horizontal neighbors, they do not have vertical neighbors.
Row house sites accounted for 13% of all Australian development sites sold in 2017, for a total value of $ 1.1 billion. This represents a significant increase from four years earlier, when only $ 152.8 million of townhomes were sold, accounting for 2.2% of total development site sales.
In recent years, the Australian Prudential Regulation Authority has encouraged financial institutions to restrict lending to investors, but at the same time, the market has seen more homeowners emerge.
Many young families who wish to move from high-density living plan to live in townhomes, which has become the most affordable option compared to a low-density, self-contained dwelling, especially for buyers in Sydney and Melbourne.
This "missing link" has long been identified in Greater Sydney and has only recently been addressed in the Low Density Medium Dwelling Housing Code of the Ministry of Planning and Environment. NSW (valid from July 2018), which allows rapid development and approval of double occupancies, mansions and terraces with one and two floors.
Given the NSW government's trend toward high-density housing construction in 2014, developers were less likely to build medium-density developments. However, since the publication of the draft Low Density Housing Code in 2016, the share of the average density sites purchased by developers has started to increase, as well as building permits for medium density housing.
Medium density projects offer developers the least risky option to embark on a horizontal stage development instead of fully engaging in a vertical project with the chance that the market will cool down.
This also facilitates developers' access to debt financing because high-density projects require a large pre-sale before construction begins.
A medium density development is also a logistically easier product to build. As more and more buyers continue to reduce or increase the townhouse market, it is likely that new medium-density homes will be built across the country to meet this demand.
Michelle Ciesielski
is head of residential research
at Knight Frank Australia
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