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PRESS RELEASE – Medium-density home prices to climb 10pc – Curated and Collated by Matt George, Urban Activation – PRESS RELEASE

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PRESS RELEASE – Medium-density home prices to climb 10pc – Curated and Collated by Matt George, Urban Activation – PRESS RELEASE

As initially published by Nila Sweeney, Reporter AFR, Feb 4, 2020 — 12.24 pm

Prices for premium townhouses and low-rise apartments are set to climb by up to 10 per cent in 2020 as demand from affluent ‘right-sizing’ buyers outpaces supply, a Knight Frank analysis shows.

The consultancy firm found that the share of medium-density dwellings due to complete by 2022 nationwide, has fallen by nearly half (47 per cent) compared to the previous three years.

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In Sydney, the share of medium-density homes under construction fell by 6 percentage points to 44 per cent of the total pipeline, with the lower north shore recording the sharpest drop of 41 percentage points to just 22 per cent.

Over this time, less than a third are expected to be built in the prime regions of the CBD and inner Sydney, eastern suburbs, inner west and lower north shore.

“This shortfall will impact prices given the high demand,” said Knight Frank’s head of residential research, Michelle Ciesielski.

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n Melbourne, the share of medium-density housing due for completion by 2022 has dropped by 25 percentage points in the inner north, while there’s virtually nothing in the pipeline for inner Melbourne and the inner east.

“As the value of Sydney and Melbourne prestige houses continue to rise in 2020, although limited in number, townhouses provide an option for those who want to live in prime suburbs but are unable to stretch their budget to a standalone house,” said Ms Ciesielski.

“With the competition from those seeking to right-size, we expect prime medium-density prices in both cities to range from 7 to 10 per cent annual growth in 2020, dropping closer to a more sustainable 3 to 5 in 2021.”

By contrast, the Gold Coast has added 11 per cent to its medium-density pipeline due for completion within three years, taking the total share to 81 per cent. Brisbane’s supply has expanded by 26 per cent and Perth by 23 per cent bolstered by the available land supply.

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The persistently missing middle

Ms Ciesielski said most luxury right-sizers – a blend of active retirees, families and entrepreneurs seeking the right amount of space for their needs – are looking for a minimum of 3 bedrooms, which can be challenging for a developer to deliver with limited suitable development sites available in prime suburbs.

While developers tend to respond to market demand as swiftly as possible, Capio Group chief executive officer Mark Bainey said planning difficulties and the lack of zoned land are major barriers to supplying this segment.

“I think supply will remain low in the foreseeable future because it’s so difficult to gain building approvals and to obtain the land needed for a townhouse project,” he said.

“Obviously you need a lot of land to develop such a project and there are hardly any large parcels available in Sydney’s premium suburbs, where you need to build because a premium product needs to be in a premium location.

“We’re seeing strong demand for these products especially those located within high amenity suburbs as buyers now have access to a larger pool of cash after selling their family homes. Unfortunately, we can’t build enough.”

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