From development land, residential land to townhomes whatever you are looking for RPM has the ideal location for you.
While many Australians felt the delivery of a 25 basis point cash rate rise in December was akin to a lump of coal in their Christmas stocking, the lift was required to help suppress inflation and support longer term economic sustainability. The cash rate now sits at 3.35% (as at February 2023) and is expected to rise again in the coming months, but with December’s inflation rising beyond market expectations (although still below RBA forecasts), the projected interest rate pathway still remains uncertain.
Increased interest rates and decreasing access to mortgage finance have impacted the detached home and unit markets across Metropolitan Melbourne, with median prices softening by 13% and 9% respectively since their peak in December 2021. This flow-through effect on house prices and affordability will persist through 2023 as previous cash rate increases are reflected in upcoming mortgage rates.
As a result of mortgage rate increases, there has been a material fall in the purchasing power of prospective buyers. As at April 2022, a household with a $100,000 income had a purchasing power of around $730,000. Today, that same household can only afford approximately $540,000 for a home, with this to fall further through 2023. Given Melbourne’s median house price, while falling from well over a million dollars, remains high at $974,000, the opportunity for an affordable product offering remains strong across the market.
Given the relationship between property prices, purchaser income, cost of living and access to finance in driving the ability to purchase a home, first home buyers are especially challenged in the current market. One of the greatest hurdles for first home buyers is the capacity to save a necessary deposit, which becomes increasingly out of reach as cost of living increases, and not necessarily ‘easier’ in a market where prices are falling. Diversity of product offering at affordable price points can assist in overcoming some of these barriers to entering the market.
The price premium between houses and units creates space for a distinct product to satisfy the balance of affordability and desirable housing characteristics. Townhomes help provide diversity in the Melbourne market, and we’re especially witnessing the necessity and market uptake of this product in the maturing greenfield markets.
Townhome approvals remained firm across Metropolitan Melbourne throughout 2022 despite declines in both homes and unit prices. While prices softened through 2022 it remains comparatively high and above 2020 prices.
This article was originally published in our Q4 2022 Greenfield Market Report. For the full report, click here.