fremantle housing market analysis · 2015. 3. 27. · fremantle housing market analysis 1 fremantle...

Fremantle Housing Market Analysis

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Fremantle housing market analysis

Under the Affordable Housing Strategy; Opening Doors 2010 -

2020 the Department of Housing has a mandate to lead vital

changes in our housing system and, through new partnerships, start

opening more doors for more people more quickly.

The Department of Housing works with markets to be able to

maximise overall economic and social outcomes and this document

looks at the local housing market and guide a suitable development

approach.

This document should also be read in conjunction with City of

Fremantle strategies and State planning strategies to understand

how Government is planning for the growth of the Perth

Metropolitan region, to consider how your project can maximise its

contribution.

Housing market outcomes

The State Government seeks to support housing markets to

respond to people’s needs needs and grow communities in ways

that allow people to belong, participate and prosper. The ability for

people to choose viable places to live, from amongst a range of

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:

Affordability - this means the market can supply housing

that is appropriate and accessible for households to have

viable choices to live and work and join the community.

Affordable housing is more accessible and supports people

to choose where they want to live and the prosperity of the

local community.

Diversity – is important so that parts of the city can benefit

from a wider range of skills, abilities and lifestyle

preferences and so that a full range of household types

more choices to live closer to access the benefits of key

locations. Diversity helps build economic and social capital

by supporting people to connect and to do business.

Accessibility – is improved where people can conveniently

get about the city to access the services and benefits it

offers and access to a range of viable transport options is

critical to increasing the efficiency of moving people about.

Innovation – means finding new ways to deliver housing

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

housing industry, to increase the market’s capacity to deliver

affordable housing so that more housing can be produced at

lower price points that still offer a marketable standard of

what people demand from their housing.


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Strategic marketing - setting the project direction

A vision of your completed project will lead its design in the right

direction towards the above development principles. A project vision

encapsulates the value and lifestyle opportunities it offers to

residents and the Fremantle community and sums up the identity

and marketable points of difference that distinguish the project from

any competitors.

In creating a project vision, consider:

Who is the project being marketed to?

What are the characteristics of the specific target demand

groups?

How will it cater to and support their lifestyles and

preferences?

How will residents connect and belong to the community?

How will the dwelling specifications meet their needs?

How much can they pay and is the price right?

How can I design the project to maximise affordability?

What innovative methods and materials will it benefit from

and what will the benefits be (such as construction

processes, materials, financing arrangements, business

models or tenancy management models)?

The above is aligned with the project objectives of the Competition

design brief.

The rest of this document is designed to help answer these

questions.

Housing affordability

Affordable Housing refers to dwellings that households on low-to-

moderate incomes can afford to rent or buy, while meeting other

essential living costs such as food, healthcare, education and

transport. Considering this in the context of the broader housing

market, affordability can be calculated according to the amount that

is:

a) Affordable for the household based on its income (i.e.

Income Based), or

b) Affordable in comparison to the current local housing market

(i.e. Market Relative).

Income based affordability

Efforts to define affordable housing generally reference household

incomes and the ability for households to meet housing expenses.

This is an important measure that should be considered in

conjunction with Market Relative Affordability when setting a range

of affordable housing price points.

Housing is generally considered affordable when expenditure on

housing costs is less than 30% of the gross household income. An

accepted measure of affordable housing expenditure is 30% of


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income for households in the bottom 40% of income distribution.1

Income based affordable price points should provide housing

opportunities that are affordable for households based on either the

Perth or locational median income or a portion thereof, depending

on the income band of the target client group. To ensure that a

range of price points are delivered to cater for the various income

bands, the calculation should be repeated for 50%, 80%, 100% and

120% of median income for the LGA.2 This will enable an

assessment of the likely affordable housing outcomes than can be

delivered. Income bands are defined as:

Table 1: Income Band Definitions

Income Band Refers to Households with incomes:

Very Low Less than 50% of the median income.

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.

Market relative affordability

Market Relative affordable price points enable new housing stock to

be delivered at rates which are more affordable than the current

market prices for the location. Calculating the Market Relative

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.

Affordability of a location will assist in determining whether a project

can deliver affordable housing beyond meeting affordability

guidelines for specific income cohorts.

Market relative affordability is calculated by halving the difference

between the suburb and the Perth Metro lower quartile prices for

the relevant housing type, house or multi-unit. The market relative

price is set as the half-way point between the suburb lower quartile

price and the Perth lower quartile price.

The creation of market relative affordable housing opportunities

seeks to add new affordable housing supply that complements the

existing housing market. Increasing housing supply at lower price

points will place downward pressure on median house prices in the

area without affecting the value of existing housing stock.

Housing affordability targets

To deliver affordable outcomes your project should demonstrate

how it delivers housing opportunities that meet housing affordability

targets. The following targets set relevant goals for the local market

and are used to focus project design and innovation to achieving

value around these price points.


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Income Relative Affordability3

The table below shows current income based affordability targets

for Fremantle as of July 2014, based on Fremantle LGA median

gross household incomes. These targets are updated yearly to

reflect changing market conditions.

Table 2: Income Relative Affordability

% of Median INCOME

Income weekly

Income yearly

Rent weekly

House Price

50% median $ 695 $ 36,240 $ 209 $ 173,300

80% median $ 1,112 $ 57,984 $ 334 $ 277,200

Median $ 1,390 $ 72,480 $ 417 $ 346,500

120% median $ 1,668 $ 86,976 $ 500 $ 415,800

The table above shows that for Fremantle’s households on

moderate incomes (starting at 80% of median income), housing is

affordable where it is below $277,000, and at rents up to $334 a

week.

For low income households with less than 50% of median incomes,

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.

Market Relative Affordability

This target has been set between the Perth Metro and Fremantle

suburb lower quartile prices form the latest REIWA Market Update

Report.

Perth Metro lower quartile multi unit = $430,000

Fremantle lower quartile multi unit = $345,000

Perth Metro LQ – Fremantle LGA

= $430,000 - $345,000

= $85,000

$85,000/2

= $42,500

$345,000 + $42,500

= $387,500

A market relative target uses REIWA sales price data to calculate a

price point that will integrate new supply with the existing property

market and improve that range of the entry-level product choices.

Market relative affordable housing can be grouped into purchase or

rental opportunities.


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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

This section identifies the unique characteristics of the Fremantle

LGA community by contrasting it to the whole of Perth.

Couples without children have been the largest growth type at

around half of all growth.


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Fremantle has higher concentrations of smaller households and

significantly fewer larger households.

However, growth has been concentrated in 2 person households

and larger households.

Renting has seen the largest rate of growth across Fremantle from

an existing high rate compared to wider Perth. Social housing rates

are above the Metro average and mortgage ownership rates are

lower than average.


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The suburb of Fremantle compared to City of Fremantle

average

Smaller households make up a larger part of the Fremantle

community which is also reflected in the Fremantle (suburb).

Fremantle (suburb) contains higher rates of lone person households

than across Fremantle.


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The most significant change to households in Fremantle (suburb) is

the increase of Couples with children entering into the area.

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

(Above) The City of Fremantle contains almost 30% smaller

dwellings and very low rates of larger dwellings.

The City of Fremantle has been adding mostly 3 and 4 bedroom

stock

.


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The City of Fremantle has been adding a diverse range of dwelling

types and continues to concentrate growth into medium and high

density.

Suburb of Fremantle (suburb) dwelling stock compared to the

City of Fremantle

Fremantle (suburb) has a higher share of 2 bedroom dwellings but

somewhat below the Fremantle (LGA) indicators for dwellings 3

bedrooms and above.


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Family accommodation continues to grow strongly with 3 bedroom

dwellings leading the way in new housing stock in Fremantle

(suburb).

Dwelling structure is predominantly separate houses matched by

medium density in Fremantle (suburb) compared to the City of

Fremantle.

Fremantle has shifted to concentrate new supply in medium density

housing; often these can be flats, villas and low rise apartments.

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

price points, it is just as important to achieve a mix reflecting the

diversity of housing options.

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 median gross household incomes

$346,500

Maximum Affordable Housing Price on 80% of Fremantle LGA median gross household incomes

$277,200

Maximum Affordable Housing Price on 50% of Fremantle LGA median gross household incomes

$173,300


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However, these price points can also be achieved through the

Department’s ‘SharedStart’ program if the ‘market price’ exceeds

Under ‘SharedStart’ the State Government holds a percentage of

equity in a property with the potential homebuyer purchasing the

remaining amount.

A common equity share composition is:

1) 80% of ‘at market’ value of property by homebuyer

2) 20% of ‘at market’ value of property held by State

Government

The table outlines the achievability of the affordable housing target

price range it the 80/20 SharedStart scheme is used.

Table 4: Preferred Affordable Market Price Points Using SharedStart

Scenario based on Household median income

SharedStart Price 80/20

Maximum Market Price Point

Maximum Affordable Housing Price $387,500 $484,375

Maximum Affordable Housing on Fremantle LGA median gross household

income

$346,500 $433,125

Maximum Affordable Housing Price for households on 80% of Fremantle LGA

median gross household income

$277,200 $346,500


median gross household incomes

$173,300 $216,625

This provides tremendous flexibility if construction costs necessitate

the use of a shared equity mechanism to achieve affordable entry

price points.

Alternatively, if target ‘at market’ price range is achievable an 80/20

SharedStart scheme can still be used to create even more

affordable price points.

Table 5: Application of SharedStart on Preferred Affordable Market

Price Points

Scenario based on Household median income

SharedStart Price 80/20

At Market

Maximum Affordable Housing Price $310,000 $387,500

Maximum Affordable Housing on Fremantle LGA median gross household

income

$277,200 $346,500


median gross household income

$221,760 $277,200


median gross household incomes

$138,400 $173,300

Please note the target price ranges do not specify:

a) Development type. Ie. Grouped dwelling or multiple

dwellings

b) Configuration (no. of bedrooms)

c) Size of lots (if applicable)


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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.

fremantle housing market analysis · 2015. 3. 27. · fremantle housing market analysis 1 fremantle...

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