Given the extent to which property prices are determined by land costs in Australia, expanding land supply levels could be the best means of shoring up home affordability.

A recent nation-wide study has found that land supply posted impressive gains in most states throughout Australia last year.

The 2015 UDIA State of the Land Report used data provided by the National Land Survey Program (NLSP) to determine that the number of greenfield residential lots on sale throughout Australia rose by an impressive 31 per cent in 2014.

The NLSP data indicates that Melbourne and South East Queensland were the two regions of Australia that topped gain in new residential land supply, with new lot numbers increasing in these areas by 61 per cent and 55 per cent respectively.

Sydney also saw an increase of 29 per cent in the release of new lots.

Should this trend continue into 2015, it should bode well for the affordability of housing, which has surged since the GFC on the back of unrelentingly low interest rates and an influx of foreign investment.

According to Rob Sindel, managing director of building products supplier CSR, expanding land supply is the best solution to the dilemma of unaffordable housing.

While other solutions have been mooted for abetting the affordability, such as adjustments to the stamp duty system, Sindel pointed out that expensive land is the chief cause for the high housing prices, given that efficiency gains have curbed growth in building costs.

“You can mess around with stamp duty and other things, but it is freeing up land that will satisfy affordability,” said Sindel to Fairfax.

Other leading sources point to a looming shortage of housing throughout country.

The Property Council estimates that by 2024, Sydney will suffer from a deficit of 190,000 homes compared to population requirements, while the 2015 intergenerational report projects that Australia will need to at least double its housing stock in order to remain abreast of population increase.

Australia’s political leaders have already responded to these worrying projections by focusing further on ramping up land supply.

Treasurer Joe Hockey has announced that he will discuss the issue of housing supply with state treasurers as part of efforts to address worsening levels of affordability for first time home-buyers.

“Prime Minister Tony Abbott and myself…are concerned for first home buyers in particular who are finding it increasingly difficult to get into the home market and home ownership,” said Hockey. “I’m going to raise that with treasurers in the next couple of weeks.”

NSW Premier Mike Baird also made a pre-election promise to “supercharge” the state’s housing supply, by doubling the target for the release of government-owned land for housing to a total of 20,000 lots over a four-year period.

According to UDIA national president Cameron Shephard, such measures are still highly necessary despite last year’s impressive land supply increase.

“The increased activity identified in the 2015 State of the Land Report is great for the Australian economy, housing affordability, and jobs in the construction industry, but in many ways it has masked a number of underlying problems with Australia’s housing market,” Shephard said.

“Nationally, Australia still suffers from a marked undersupply of new housing stock, caused by inadequate investment in infrastructure, slow planning and approvals systems, and high taxes and charges on new housing supply.”

  • This is true, but it is just a single aspect of the cost — phasing out stamp duty on primary residences for all buyers and negative gearing, would have infinitely more benefits for affordability.
    Also, profits from retirees selling their family home should be exempt from the pension means test so as not to penalise downsizers.
    Most importantly, land banking and the manipulation of the market through the limited release of land by developers is a key issue that needs to be investigated — taxes should be introduced for residentially zoned, unused property, to penalise this immoral practice.

    • Fortunately the PM has ruled out any changes to negative gearing. But the real debate is about housing affordability, both for young people/first home buyers now and also in the future which is an issue highlighted by the Intergenerational Report.

      There is bipartisan consensus that the key to affordability is increasing the housing supply. But the debate seems to have been confused with issues like negative gearing and rules about foreign investment in real estate. Negative gearing is mostly used by people on lower and middle incomes to increase their family's wealth and apparently by first home buyers to enter the housing market. Abolishing would do nothing to increase supply which is after all the main game.