Premium townhouses account for just 7.5% of new supply, but generate over 23% of buyer enquiries, creating opportunities for developers and investors according to Westbridge Funds Management.
Leading Perth-based property fund manager – Westbridge Funds Management says a significant undersupply of premium townhouse stock is creating valuable opportunities for developers and investors.
Recent figures from property data provider, PropTrack (REA Group), reveal a substantial shortfall in the supply of premium townhouse product relative to skyrocketing demand.
The bulk of new townhouse supply in Perth in the September quarter 2022 was in the $500,000-$750,000 price bracket.
Townhouses valued between $1-$1.5 million accounted for just 11.3% of new supply, but generated 29.2% of buyer enquiries according to PropTrack.
There is an even greater shortfall of townhouses in the $1.5-$2 million price range, which made up 7.5% of new supply while generating 23.3% of buyer enquiries in the September quarter.
Rezonings, strong price growth create new opportunities for developers
A number of rezonings, including the rezoning of the City of Nedlands in 2019, have opened up new opportunities for developers in the townhouse space.
The appeal of townhouse developments in Perth's sought-after Western suburbs is further supported by strong value growth.
Data from the Real Estate Institute of WA confirms that median house prices in Perth's Western suburbs rose 14.79% in the 12 months to June 2022, outstripping value growth of 2.51% across Greater Perth over the same period.
A similar trend can be seen over the last 5- and 10-year periods, with median house prices in the Western suburbs rising by 34.47% and 50.54% respectively over these timeframes.
Mr Damian Collins, Chairman of Westbridge Funds Management, said "Right now, we are seeing a trifecta of factors come together – high demand, low supply and rising property values, that give developers and investors an exciting opportunity to harness attractive returns in the premium townhouse market.
"This type of development hasn't been common in Perth's Western suburbs until recent years. Yet at the same time, we are seeing pent-up demand for premium townhouse product, particularly from the downsizer demographic, who are not impacted by rising mortgage interest rates."
Westbridge focus on luxury townhouse developments
Westbridge Funds Management has recognised the opportunities offered by Perth's premium townhouse market, having undertaken several developments in the Western suburbs, including the newly completed townhouse project at Adelma Road in Dalkeith, and the recently closed Cottesloe Fund and multi-asset Townhouse Fund.
"The strong sales outcomes and the continued growth we've seen in suburbs such as Dalkeith has helped to absorb and, in some cases, even outpace rising construction costs, which has underpinned the strong and continued potential of developments in this space," concluded Mr Collins.
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