According to The Australian Financial Review, demand for medium-density development sites with permits in Melbourne's inner and middle-ring suburbs has surged as rising house prices push up demand from families for townhouses and larger apartments.
Figures compiled by Permitready.com.au, a real estate portal which lists development sites for sale with permits, show inquiries were up 60 per cent in October compared with the same time last year, with sites three to 15 kilometres from the CBD the most popular.
While concerns remain about oversupply in the centre of Melbourne because of a pullback from investors, in the suburbs apartment and townhouse developments increasingly target owner-occupiers and are selling well.
"Our results show that in the past 12 months developmental-approved land offerings averaging nine kilometres from Melbourne's CBD are consistently attracting strong inquiry levels from both developers and investors," said Permit Ready managing director Nick Materia.
"Additionally we have noticed a number of development groups focusing on delivering townhouse projects over apartment products. In part this is a result of financial constraints, supplier demand, pre-sales demand and efficient construction timelines and the reduced costs associated," Mr Materia said.
In the past month Savills Australia has sold more than $20 million worth of inner suburban development sites, including a 429-square metre site in Heidelberg, 13 kilometres north-east of the CBD, for $5 million with a permit for 20 large apartments and five shops.
Knight Frank's head of commercial sales for Victoria, Danny Clark, said recent transactions strongly supported demand for middle-ring townhouse sites.
Recently, developer Glenvill sold 55 out of 60 townhouses in one morning in the second stage of its YarraBend project in Kew, 6.5 kilometres from the CBD with buyers mainly young couples and young families.
By comparison with the surge in the suburbs, Mr Materia said CBD sites were generating "consistent" levels of inquiry but noted a sentiment change with developers opting to buy and hold prime sites and await the next uplift in the property cycle.
"The CBD market can be considered crowded, and the results show many developers and investors are looking further out for a quicker return which is highly achievable during the current cycle," he said.
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