Quantify Strategic Insights’ new report, “Bridging the Infill Gap, Challenges to Realise the Potential in Melbourne’s Missing Middle” has just been released.
New dwelling approvals in the Established suburbs of Melbourne over the past three years are short of the official Victoria in Future 2023 forecasts, and well short of the draft dwelling targets issued by the Victorian State Government. Greater Melbourne’s Growth Areas is the only region where dwellings are being delivered at a rate in line with Victoria in Future and the dwelling targets.
Challenges exist to scale up infill supply beyond the standard government response of ‘Councils and Planning including:
- Sales volumes of detached houses in Established Melbourne have trended downwards over the past 20 years. Sales turnover is an important part of the Missing Middle equation. Increased sales free up stock to allow more appropriate matching of dwellings and households. A larger house sold by an empty nester couple is made available for a family, while unit (townhouse/apartment) sales reflect demand from smaller household types.
- Around 1 in 10 of sold houses in Greater Melbourne are demolished for redevelopment, and more than 1 in 5 in the middle ring suburbs. Demolitions provide a mechanism for delivering ‘Missing Middle’ medium density townhouse projects, but availability is reduced when house sales volumes decrease. Yields per demolished site are also not being maximised, with many demolitions ending up as one-for-one replacements.
- Higher interest rates and cost of living pressures have constrained price growth of houses and units. Meanwhile, construction/development costs have skyrocketed. The sale price required for feasible development cannot be justified relative to the market value of existing stock. Significant further growth in values is required (or reduction in development costs) to be able to viably deliver new dwellings to the market.
- Demographics are starting to work against the apartment market delivery model. Baby Boomers, the largest pool of property investors, are aging out of their peak investment years. Meanwhile, younger cohorts, particularly Millennials, face deposit hurdles and affordability barriers that prevent them from entering the market as owner-occupiers or investors. As younger generations also turn to alternative investments like shares, alternative delivery models will be required to supply apartment stock to the market at scale.
Click on the link below to download the complete report.
To discuss how Quantify can help you navigate development in the current market, contact Rob Burgess at rob.burgess@quantifysi.com.au or Angie Zigomanis at angie.zigomanis@quantifysi.com.au
