March 2023

Infrastructure Victoria has published a research report, Our home choices: how more housing options can make better use of Victoria’s existing infrastructure.

The report offers 10 policy options for the Victorian Government to support more choice for moderate income households who prefer to live in established suburbs, including: fast-tracking planning approval for high-quality townhouses, better standards for low-rise apartments and changes to developer infrastructure contributions.

The report is supported by a major piece of stated preference research conducted by The CIE, which involved a discrete choice experiment survey of more than 6000 Victorian households. The rich models of housing preferences estimated on the survey data were used by the CIE to construct a detailed model of the Victorian housing market that estimates how changes in relative prices are likely to affect demand for across 1000 specific types of housing.

Here’s what we found.

People prefer certain housing features

Dwelling structure type (i.e. whether a home is a house, townhouse or apartment) is the attribute with the biggest influence on housing choice, on average (figure 1). Most households have a strong preference for detached houses over apartments, particularly when they are looking to buy a home (figure 2). Location, the number of bedrooms, and the number of car spaces also factor into choice. Most households need to compromise on some attributes to afford a home. As a result, there is strong demand for detached houses in growth areas on the suburban fringe.

People make different choices when prices change

Demand for homes in growth areas would decrease by an estimated 17 per cent under a scenario reducing the prices of townhouses and apartments in established areas by 10 per cent and increasing the prices of homes in growth areas by 10 per cent (figure 3).

When townhouses and apartments in established areas get cheaper, households substitute away from growth-area homes to townhouses or three-bedroom apartments in inner and middle suburbs of Melbourne. They do not substitute to apartments with fewer than three bedrooms.

When homes in growth areas get more expensive, households substitute to houses in regional areas and outer suburbs, to large apartments in inner suburbs, or to a house with fewer bedrooms.

Some people are more likely to make different choices

The households most likely to substitute demand away from growth-area housing:

  • have characteristics associated with:

    • shorter tenure, such as being aged under 30 years, currently renting, having lived in Australia for five years or fewer, or being a group household

    • willingness to live in smaller dwellings, such as currently living in an apartment or being a single-person household, or

    • lower financial means, such as being a single parent, having no full-time employees in the household, or having income of less than $80 000 per year, and

  • have a stronger preference for being able to easily walk to most destinations and for maximising savings from grants and tax incentives.

Details of the methodology and results are available in our summary report and technical appendix.

For further information on how The CIE could apply these techniques to help you better understand consumer preferences, please contact Ben McNair in our Canberra office.