Drive along the old Princes Highway toward Pakenham in Melbourne’s south-east and ‘Land for Sale’ signs dot the landscape.
This is not the only corridor where land is being made available for housing. Between 2012 and 2017, the annual number of lots which were released the market for new residential development throughout Melbourne increased almost fourfold from around 6,000 to around 23,000, data from the Urban Development Institute of Australia’s (UDIA) State of the Land report published in March indicates.
During that same period, releases across South-East Queensland more than tripled from around 4,000 to more than 13,000 whilst those in Sydney more than doubled from around 4,000 to almost 10,000. Data upon which this report is based is provided by a National Land Survey Program conducted by property advisory firm Charter Keck Cramer and research firm Research 4.
The volume of releases has now modified as demand has passed its peak. Nevertheless, volumes remain at historically elevated levels.
It should be noted that the above data captures activity at the final stage of land development where lots are made available to the market. It does not reflect any movement in earlier stages, such as land being designated for development, rezoned or afforded subdivision approval.
Accordingly, it does not represent any action or otherwise of government to free up new land. Rather, it captures a push from industry to bring more land from latter stages of development to market.
Nevertheless, the expansion of releases is freeing up opportunities for greenfield housing to cater for ongoing demand notwithstanding that the peak of the boom has passed.
This raises questions about where opportunities are located and what more can be done to free up further development potential.
In Melbourne, the biggest area of activity is the south-west Wyndham corridor, where suburbs like Hoppers Crossing and Point Cook accounted for 30 per cent of sales in 2017. In the north-west, Plumpton and Rockbank nearby Melton are active markets and will provide opportunities following the release of the Plumpton Strategic Plan. In the north, the Craigieburn/Donnybrook area contributed 15 per cent of sales and this will likely grow thanks to new PSPSs in Donnybrook/Woodstock. Wollert it also expanding.
Capacity challenges are emerging in the active south-east. Casey, which has the second-top median land price of all greenfield markets, accounted for just 15 per cent of sales in 2017 as opposed to 24 per cent in 2016. Neighbouring Cardinia saw only 25 sales per month despite having accounted for 160 sales per month the previous year.
Those capacity issues are reflected more broadly. Over the three-year period spanning December 2014 to December 2017, the number of active estates across metropolitan Melbourne fell from 158 to 112. Also, as at December 2017, the inventory of stock stood at 0.6 months – well below the four-month mark considered to represent a balanced market.
Moreover, recent population gains suggest that 22,000 to 24,000 new lots will be needed annually to meet demand, UDIA says. This compares with a long-term industry average production of 15,000 lots.
In Sydney, markets are active in the south-west and north-west, which accounted for 35 per cent and 42 per cent of sales respectively in 2017. As with Melbourne, supply challenges are looming. In the north-west, only 32 estates are currently trading as against 54 at the peak of the current cycle. The south-west has a greater proportion of larger estates with stronger supply lines. However, anticipated supply in some of these estates is waning.
Going forward, UDIA NSW expects Blacktown to be the most active area for new supply over the next five years as 16,200 lots are released. This is followed by The Hills Shire (12,500), Camden (12.310) and Liverpool (8,150).
Across South East Queensland, lot releases rose 2.2 per cent again in 2017 from what was already an elevated base. Logan is developing as an alternative to the Gold Coast as affordable locations on the latter dry up. Overall, UDIA says land is generally being made available in locations which match buyer preferences, whilst current sales are well matched to supply.
On policy, UDIA says there are challenges across different states. In New South Wales, it applauds the work of the Greater Sydney Commission in preparing the Greater Sydney Region Plan and district plans, local government reform to depoliticise decision making and proposed biodiversity reforms which it says will provide greater certainty through a strategic bio-certification process.
In Victoria, UDIA applauds efforts to improve planning efficiency through the Smart Planning Initiative, but harbours concerns about other areas of housing policy development. These include the use of parliamentary processes to overturn planning decisions and a new Garden Areas Requirement. Timeframes to issue titles, UDIA says, are stretching beyond 15 months in some instances.
More broadly, UDIA wants state and local governments to undertake reform to reduce delays and free up land supply, replace stamp duty with a broader based form of taxation, tread cautiously with value capture mechanisms, reduce up-front charges and levies on new housing, ensure that planning agreements for rezoning do not become ‘betterment’ taxes and reduce foreign buyer and developer charges.
Federally, the institute wants the National Cities Performance Framework to be tied to how and where future City Deals are struck, the National Housing Supply Council to be restarted, support for foreign investment, greater funding for the National Housing Infrastructure Facility, more investment in public and social infrastructure and the maintenance of existing arrangements for negative gearing and capital gains tax.
Robert Papaleo, national executive director of Charter Keck Cramer, says the expansion of lot releases reflects industry efforts to bring greater land volumes to market in response to strong housing demand.
Regarding opportunities, Papaleo says Melbourne enjoys more active corridors than any other city and that Wyndham corridor was the standout performer within Melbourne.
In Sydney, the corridors are largely biased toward the south-west where the growth runs are opening up through Camden and through the Liverpool corridor, he says, adding that there is yet to be meaningful new supply in some of the growth corridors which have opened up over the past five to 10 years.
In South East Queensland, much of the growth is occurring in the western suburbs of Brisbane and in the Ipswich corridors.
In terms of impediments, Papaleo says these differ across cities. Especially in Sydney, infrastructure delivery programs do not always link up with government policies on where it wants development. There are also challenges around getting infrastructure in place quickly enough at reasonable cost.
In South East Queensland, a smaller number of opportunities are concentrated in tighter areas. In Melbourne, a challenge involves the capacity of the civil construction – which is stretched amid significant infrastructure developments – to get on site across all sites which require services such as power and water. Across the board, continuing escalation of developer charges is impacting prices and limiting the volume of sales which can be achieved.
Meanwhile, concerns are being raised about gaps in data and a lack of visibility about the volume of land which is in development and/or passing through various stages of land development.
In its latest Residential Land Report published in conjunction with CoreLogic, the Housing Industry Association published an audit of publicly available data regarding the volume of land which is at and passing through seven core stages. These are: designation for urban development, zoning for urban development, subdivision planning approval, subdivision works approval, subdivision completion approval, title registration and the sale of lots to the market.
According to that report, none of New South Wales, Tasmania or the Northern Territory publish any clear data about the volume of land either sitting in or moving through any of the seven stages. In these states, how much land sits in or is moving through the various stages is anyone’s guess.
Visibility is better in South Australia, Victoria and Queensland. South Australia, for instance, published data about the volume of stock in the final stages of subdivision planning approval, subdivision works approval and subdivision completion approval, title registration and lots sold to market. It also publishes information about the flow of stock through various stages of subdivision planning approval, subdivision completion approval and title registration.
Even in these states, however, data in some areas is lacking. Victoria, for instance, publishes data about the volume of land awaiting zoning for urban development, subdivision planning approval, and subdivision completion approval, but does not publish data on how much land is sitting in the various stages.
HIA senior economist Shane Garrett says greater visibility in these areas would provide several benefits.
First, it would enable government and industry to establish a clear picture of the long term trajectory of the volume of land which is likely to be made available for housing. Policy makers could compare this with forward indicators of housing demand (such as population or income growth) and determine whether the projected supply of land will be sufficient to meet anticipated housing needs. For industry, it would provide a clearer picture of the volume of land which can be brought forward to meet current market demands as opposed to that which will be needed for future use.
Second, clearer data about volumes of land at and passing through the various stages would provide greater visibility about where system blockages lie. Currently, Garrett says, the industry has anecdotal ideas about this. With clearer data, however, these blockages could be pinpointed more precisely. This, Garrett says, would highlight areas where either reform was needed or investment in staff or IT was warranted.
Finally, reporting of such data would help ensure that governments themselves understand how much land is passing through the pipeline. Whilst it is likely that government departments and agencies collect data at various points, Garrett said the lack of reporting means there is no guarantee that this information is not getting lost in silos or that it is being recorded, collated and made available to decision makers in a coordinated and adequate way. Making data public, Garrett said, would force governments to collect, manage and maintain that data in a meaningful way. This would aid decision making within the government itself.
In response to demand, Australia’s development industry is opening up new land.
To continue momentum and to aid decision making, further reform is needed to free up land whilst better and clearer data is also needed.