Fremantle Housing Market Analysis
Fremantle housing market analysis Affordability - this means the market can supply housing that is appropriate and accessible for households to have Under the Affordable Housing Strategy; Opening Doors 2010 - viable choices to live and work and join the community. 2020 the Department of Housing has a mandate to lead vital Affordable housing is more accessible and supports people changes in our housing system and, through new partnerships, start to choose where they want to live and the prosperity of the opening more doors for more people more quickly. local community. Diversity – is important so that parts of the city can benefit The Department of Housing works with markets to be able to from a wider range of skills, abilities and lifestyle maximise overall economic and social outcomes and this document preferences and so that a full range of household types looks at the local housing market and guide a suitable development more choices to live closer to access the benefits of key approach. locations. Diversity helps build economic and social capital by supporting people to connect and to do business. This document should also be read in conjunction with City of Accessibility – is improved where people can conveniently Fremantle strategies and State planning strategies to understand get about the city to access the services and benefits it how Government is planning for the growth of the Perth offers and access to a range of viable transport options is Metropolitan region, to consider how your project can maximise its critical to increasing the efficiency of moving people about. contribution. Innovation – means finding new ways to deliver housing Housing market outcomes options that achieve the above three principles in forms and products that consumers value. Government is seeking innovation that can transferred and applied across the The State Government seeks to support housing markets to housing industry, to increase the market’s capacity to deliver respond to people’s needs needs and grow communities in ways affordable housing so that more housing can be produced at that allow people to belong, participate and prosper. The ability for lower price points that still offer a marketable standard of people to choose viable places to live, from amongst a range of what people demand from their housing. locations and lifestyle alternatives underpins the labour market and is key to building the State’s prosperity. State Government works with industry so that the market can provide improve housing supply to enable more Western Australians to have a place to call home. Major principles are sought to achieve these outcomes:
1
Fremantle Housing Market Analysis
Strategic marketing - setting the project direction The rest of this document is designed to help answer these questions. A vision of your completed project will lead its design in the right direction towards the above development principles. A project vision Housing affordability encapsulates the value and lifestyle opportunities it offers to residents and the Fremantle community and sums up the identity Affordable Housing refers to dwellings that households on low-to- and marketable points of difference that distinguish the project from moderate incomes can afford to rent or buy, while meeting other any competitors. essential living costs such as food, healthcare, education and transport. Considering this in the context of the broader housing In creating a project vision, consider: market, affordability can be calculated according to the amount that Who is the project being marketed to? is: What are the characteristics of the specific target demand a) Affordable for the household based on its income (i.e. groups? Income Based), or b) Affordable in comparison to the current local housing market How will it cater to and support their lifestyles and preferences? (i.e. Market Relative).
How will residents connect and belong to the community? Income based affordability How will the dwelling specifications meet their needs? How much can they pay and is the price right? Efforts to define affordable housing generally reference household How can I design the project to maximise affordability? incomes and the ability for households to meet housing expenses. What innovative methods and materials will it benefit from This is an important measure that should be considered in and what will the benefits be (such as construction conjunction with Market Relative Affordability when setting a range processes, materials, financing arrangements, business of affordable housing price points. models or tenancy management models)? Housing is generally considered affordable when expenditure on The above is aligned with the project objectives of the Competition housing costs is less than 30% of the gross household income. An design brief. accepted measure of affordable housing expenditure is 30% of
2
Fremantle Housing Market Analysis income for households in the bottom 40% of income distribution.1 Affordability of a location will assist in determining whether a project can deliver affordable housing beyond meeting affordability Income based affordable price points should provide housing guidelines for specific income cohorts. opportunities that are affordable for households based on either the Perth or locational median income or a portion thereof, depending Market relative affordability is calculated by halving the difference on the income band of the target client group. To ensure that a between the suburb and the Perth Metro lower quartile prices for range of price points are delivered to cater for the various income the relevant housing type, house or multi-unit. The market relative bands, the calculation should be repeated for 50%, 80%, 100% and price is set as the half-way point between the suburb lower quartile 120% of median income for the LGA.2 This will enable an price and the Perth lower quartile price. assessment of the likely affordable housing outcomes than can be delivered. Income bands are defined as: The creation of market relative affordable housing opportunities seeks to add new affordable housing supply that complements the Table 1: Income Band Definitions existing housing market. Increasing housing supply at lower price Income Band Refers to Households with incomes: points will place downward pressure on median house prices in the Very Low Less than 50% of the median income. area without affecting the value of existing housing stock. Low Between 50% and 80% of the median income Moderate Between 80% and 120% of the median income. High Above 120% of the median income. Housing affordability targets
Market relative affordability To deliver affordable outcomes your project should demonstrate how it delivers housing opportunities that meet housing affordability Market Relative affordable price points enable new housing stock to targets. The following targets set relevant goals for the local market be delivered at rates which are more affordable than the current and are used to focus project design and innovation to achieving market prices for the location. Calculating the Market Relative value around these price points.
1 Generally known as the 30/40 rule. 2 The median income of the LGA rather than the suburb will allow for a greater catchment area and diversity. This can be accessed from ABS 2011 Census.
3
Fremantle Housing Market Analysis
Income Relative Affordability3 Market Relative Affordability
The table below shows current income based affordability targets This target has been set between the Perth Metro and Fremantle for Fremantle as of July 2014, based on Fremantle LGA median suburb lower quartile prices form the latest REIWA Market Update gross household incomes. These targets are updated yearly to Report. reflect changing market conditions. Perth Metro lower quartile multi unit = $430,000 Fremantle lower quartile multi unit = $345,000 Table 2: Income Relative Affordability % of Median Income Income Rent House Price Perth Metro LQ – Fremantle LGA INCOME weekly yearly weekly = $430,000 - $345,000 50% median $ 695 $ 36,240 $ 209 $ 173,300 = $85,000 80% median $ 1,112 $ 57,984 $ 334 $ 277,200 $85,000/2 Median $ 1,390 $ 72,480 $ 417 $ 346,500 = $42,500 120% median $ 1,668 $ 86,976 $ 500 $ 415,800 $345,000 + $42,500 = $387,500
The table above shows that for Fremantle’s households on A market relative target uses REIWA sales price data to calculate a moderate incomes (starting at 80% of median income), housing is price point that will integrate new supply with the existing property affordable where it is below $277,000, and at rents up to $334 a market and improve that range of the entry-level product choices. week. Market relative affordable housing can be grouped into purchase or For low income households with less than 50% of median incomes, rental opportunities. an affordable price would be $173,000 and at rents up to $209 a week.
3 Income relative affordability – based on Census 2011 weekly household income figure, indexed to December 2013 figures using the Department of Treasury’s Wage Price Index. Assumes a 10% deposit, using an interest rate of 5.71% ,an average of the big four banks standard variable rate.
4
Fremantle Housing Market Analysis
Demographic analysis
This section describes the kinds of households that live in the City of Fremantle area. The Local Government Authority is used as a demand catchment for potential buyers and households to target, and to analyse the community to understand trends in its evolution and its unique diversity issues.
An understanding of community informs the vision, development outcomes and target demand segments to achieve the desired outcomes for the Fremantle community.
The City of Fremantle compared to Perth Metro average Couples without children have been the largest growth type at This section identifies the unique characteristics of the Fremantle around half of all growth. LGA community by contrasting it to the whole of Perth.
5
Fremantle Housing Market Analysis
Fremantle has higher concentrations of smaller households and significantly fewer larger households.
Renting has seen the largest rate of growth across Fremantle from
an existing high rate compared to wider Perth. Social housing rates However, growth has been concentrated in 2 person households are above the Metro average and mortgage ownership rates are and larger households. lower than average.
6
Fremantle Housing Market Analysis
The suburb of Fremantle compared to City of Fremantle average
Fremantle (suburb) contains higher rates of lone person households than across Fremantle. Smaller households make up a larger part of the Fremantle community which is also reflected in the Fremantle (suburb).
7
Fremantle Housing Market Analysis
The most significant change to households in Fremantle (suburb) is (Above) The City of Fremantle contains almost 30% smaller the increase of Couples with children entering into the area. dwellings and very low rates of larger dwellings.
Market dwelling stock characteristics
This section describes the kinds of housing options that exist in the City of Fremantle area. The Local Government Authority is used as a catchment area to describe the range of local housing choices as alternatives, competition and potential market gaps available to Fremantle.
An understanding of range of housing available will suggest potential market opportunities for this site where wider choices can be offered to attract more diverse households. The City of Fremantle compared to Perth Metro average The City of Fremantle has been adding mostly 3 and 4 bedroom stock
.
8
Fremantle Housing Market Analysis
Suburb of Fremantle (suburb) dwelling stock compared to the City of Fremantle
The City of Fremantle has been adding a diverse range of dwelling types and continues to concentrate growth into medium and high density. Fremantle (suburb) has a higher share of 2 bedroom dwellings but somewhat below the Fremantle (LGA) indicators for dwellings 3 bedrooms and above.
9
Fremantle Housing Market Analysis
Family accommodation continues to grow strongly with 3 bedroom Fremantle has shifted to concentrate new supply in medium density dwellings leading the way in new housing stock in Fremantle housing; often these can be flats, villas and low rise apartments. (suburb).
Affordable Housing Target Price Range
One of the key project objectives of the Competition is the achievement of affordable housing outcomes. This is determined by the ability to construct and sell houses within an affordable housing target price range.
The table below outlines the target price range based on the different intervals of the Fremantle LGA median gross household income. Each segment serves as a guide to different price points teams can try and achieve. While it is preferable to have low entry Dwelling structure is predominantly separate houses matched by price points, it is just as important to achieve a mix reflecting the medium density in Fremantle (suburb) compared to the City of diversity of housing options. Fremantle. Table 3: Preferred Affordable Market Price Points Scenario based on Household median income At Market Price Maximum Affordable Housing Price $387,500 Maximum Affordable Housing Price on Fremantle LGA $346,500 median gross household incomes Maximum Affordable Housing Price on 80% of $277,200 Fremantle LGA median gross household incomes Maximum Affordable Housing Price on 50% of $173,300 Fremantle LGA median gross household incomes
10
Fremantle Housing Market Analysis
However, these price points can also be achieved through the This provides tremendous flexibility if construction costs necessitate Department’s ‘SharedStart’ program if the ‘market price’ exceeds the use of a shared equity mechanism to achieve affordable entry price points. Under ‘SharedStart’ the State Government holds a percentage of equity in a property with the potential homebuyer purchasing the Alternatively, if target ‘at market’ price range is achievable an 80/20 remaining amount. SharedStart scheme can still be used to create even more affordable price points. A common equity share composition is: Table 5: Application of SharedStart on Preferred Affordable Market 1) 80% of ‘at market’ value of property by homebuyer Price Points 2) 20% of ‘at market’ value of property held by State Scenario based on Household median SharedStart At Market Government income Price 80/20 The table outlines the achievability of the affordable housing target Maximum Affordable Housing Price $310,000 $387,500 price range it the 80/20 SharedStart scheme is used. Maximum Affordable Housing on $277,200 $346,500 Fremantle LGA median gross household Table 4: Preferred Affordable Market Price Points Using SharedStart income Scenario based on Household median SharedStart Maximum Maximum Affordable Housing Price for $221,760 $277,200 income Price Market households on 80% of Fremantle LGA 80/20 Price median gross household income Point Maximum Affordable Housing Price for $138,400 $173,300 households on 50% of Fremantle LGA Maximum Affordable Housing Price $387,500 $484,375 median gross household incomes Maximum Affordable Housing on $346,500 $433,125 Fremantle LGA median gross household income Please note the target price ranges do not specify: Maximum Affordable Housing Price for $277,200 $346,500 households on 80% of Fremantle LGA a) Development type. Ie. Grouped dwelling or multiple median gross household income dwellings Maximum Affordable Housing Price for $173,300 $216,625 b) Configuration (no. of bedrooms) households on 50% of Fremantle LGA median gross household incomes c) Size of lots (if applicable)
11
Fremantle Housing Market Analysis
This is up to teams to outline the product mix at their respective price points and what they consider to be attractive to the market based on the data presented in this document.
12