It has been widely reported the city has been struggling with a lack of available houses on the market which has sent prices skyrocketing.
New infrastructure developments, such as the construction of the new hospital and the ACC office, would bring more people to town, putting even further strain on an already stretched housing market.
Dunedin property developer Blue Sky Property Group is developing 40 townhouses across six sites in St Kilda and Musselburgh and planned to develop another 100 next year.
The company had been looking at developing in Dunedin for the past two years after seeing a need for housing intensification in the city.
The dream of a quarter-acre section was ‘‘long gone’’and fixing the housing crisis required innovative solutions, director Lyndon Fairbairn said.
The company was buying existing homes which were then either demolished or relocated.
Each townhouse was a two-storey 80sq m unit with two bedrooms. Four or five were on each section and averaged about $700,000 each.
Dunedin had limited capacity to expand, being surrounded by ocean, harbour and hills, so its only option for new housing needs would be on existing housing framework, Mr Fairbairn said.
‘‘It is the way of the future. The old draughty villas aren’t going to fix the housing crisis any more,’’ he said.
Dunedin had 15 years of population growth in the past four years and the housing stock was not prepared for it, Mr Fairbairn said.
The townhouses were sold before construction started, some in three hours.
Some were investors looking for rentals and agencies managing the hospital build had looked at them for housing workers.
Young families and Central Otago residents looking for a second home were also interested in them.
The Government’s new property tax rules, such as interest deductibility on new builds, had favoured townhouses which were ‘‘in hot demand’’, he said.
The first was expected to be finished by March next year.
