Buying a home is out of reach for many Victorians. Even with the current slowdown and tightening of credit, the growth in actual terms have skyrocketed over the last few years making home ownership an issue for many.
Affordable housing is one solution to appease the desire to own a first home.Smart developers are moving into this market due to the large number of potential purchasers who could get credit for lower priced homes.
Developments can occur in established suburbs undergoing "gentrification", outer suburbs where the government is investing in infrastructure or regional areas well connected to Melbourne via V train.
The Victorian government is working towards making home ownership more accessible by:
Abolish stamp duty for first home buyers for purchases up to $600,000 and taper the rate for purchases between $600,000 and $750,000
Establish HomesVic, a new shared equity scheme to help first home purchasers who are eligible for a bank loan but need help with a deposit
Balance the market between investors and home buyers by making the ’off the plan stamp duty concession’ fairer and introducing a land tax on vacant residential properties.
(extract from https://www.vic.gov.au/affordablehousing/buying-a-house-in-victoria.html)
Homes selling for under $350,000 is within the reach of those on lower incomes. A deposit is more manageable and lenders might accept lower deposits.
We have now worked on three projects where we expect the selling prices to be between $290,000- $350,000 for a two bedroom unit. Rental demand is strong and stable in these developments with 2 bedroom units renting at $280/week.
The success of such a development is packing in the maximum number of units- for example 5 units in lots under 700 sqm. The design of each unit adopted a modular design to control construction costs. Expensive items like kitchens and wet areas are repetitive to lower costs.
The land should be close to most amenities like schools, open spaces and shops. Being handy to main roads, employment corridors or easy commute to work and transport make living in these developments attractive.
Land costs on those sites are working out to around $60,000 per unit. Build costs for 2 bedroom units with single garage/carport to around $117,000 -$126,000 giving the developer generous margins. These units will sell faster to owner occupiers while some may be purchased by investors due to high rental demand.
The simple design, zoning, location, amenities and pro development councils are the key to success.
The general feasibility for a 5 unit design is shown below.
