The cost of land for new homes has spiked in the past decade, up almost 150 percent per square metre, while block sizes have shrunk.
At the same time, the Urban Development Institute of Australia has found the number of lots released to market has slumped in the past year – most notably in Melbourne, which in the past had enjoyed some of the healthiest levels of supply in the country.
Median block prices remained steady over the past year, and given sizes continued to shrink, the UDIA warned buyer value for money was worsening.
The average median price across the capitals was $504 per square metre. The biggest price shift was in Brisbane, up 13 per cent to $475 per square metre.
Sydney, which has the most expensive land in the country, recorded a median price fall of 12 percent – the median price is now $247,000 for an average-sized block.
While some property commentators have criticised lot size shrinkage, the UDIA said consumers had an appetite for smaller sizes as they were more affordable and that market recovery would stall if local councils rejected small-lot housing.
The UDIA used these results to renew a call for an overhaul of government taxes and charge. They were presented in its annual state of the land report on Wednesday at the group’s national congress in Brisbane.
PLANNING SYSTEMS WIDELY CRITICISED
Despite differing planning systems and a range of reforms under way across the states, planning processes have been widely criticised for restricting land release across the states.
UDIA national president Cameron Shephard said he was concerned housing had fallen off government agendas at all levels.
The UDIA called for more infrastructure investment to unlock land, for state governments to remove stamp duty on property and replace it with more efficient taxes such as a broader-based property tax.
“UDIA strongly supports a diversity of product to the market as some people want a lock-and-leave lifestyle,” he said.
“What concerns us is that a family can no longer afford a back yard where a family can play and grow.”
Strong population growth, first homebuyer and investor activity continues to drive demand for new housing lots, as does low mortgage costs.
Sydney has the most expensive land per square metre in the country, at a record-high $576 per square metre.
Sydney recorded a rise in the number of lots released but the overall amount is still below Perth and Melbourne and falls well short of demand.
There is land in the pipeline across the states, however, the UDIA has warned that a lack of infrastructure, taxes and planning restraints, land supply and housing will be unable to keep up with rising demand, which will worsen housing affordability.
SYDNEY NEW LOTS FALL BEHIND DEMAND
Sydney is expected to release 6786 new lots in 2013-14, which is a rise, but is still significantly behind demand and falls short of the 8175 target set out in the city’s metro strategy.
The NSW government has pledged planning reforms which would allow the state to be the economic “number one” in the country. But the UDIA said the state remained “hamstrung by an uncompetitive regulatory regime for land development”, two and a half years after work towards the new planning system began.
Amendments to the new planning bill, made by Labor, the Greens and Shooters and Fishers Party, left the bill in a state of flux. “Due to reform inertia and increasing industry uncertainty, Sydney’s recovery may be short lived. Without major structural reforms, the only thing saving Sydney is record low interest rates and the availability of capital,” the UDIA said.
“If governments do not implement new planning and strata regimes when interest rates rise Sydney and its developers are in for a substantial demand induced shock.”
MELBOURNE: 25PC DROP
After leading the country in lot production, the number of new lots released around Melbourne’s growth areas fell more than 25 per cent in the past year.
Overall, supply levels are still high compared with other cities – 13,447 lots were released to market in 2012-13, compared with only 5367 in land-starved Sydney.
After rising 55 per cent over the past two years, Melbourne land prices fell 3 per cent in the past year and the median lot price was down about 9 per cent, which was put down to the influx of supply the year before.
With prices softening, the UDIA gave the southern capital a thumbs-up for its affordability.
However, the UDIA noted that slow approvals for new homes and a sluggish rezoning process were still dogging development in Melbourne.
Victoria’s UDIA has voiced concerns about a new neighbourhood residential zone to be introduced as part of Plan Melbourne, which it warned could restrict new housing. But it has welcomed a government call for submissions to ensure the transition to new zones is done sensibly.
BRISBANE PRICES STILL TOO HIGH
Brisbane has begun to show recovery signs in its land market, which is fortunate given only 4440 lots were released there in 2012-13, compared with 9738 in 2006-07.
Brisbane’s per square metre average price was $475 in 2012-13 and the UDIA said developers were struggling to deliver land at prices buyers were willing to pay – therefore last year’s sales were subdued.
Queensland Treasury has identified more than 27,800 hectares of broad hectare land that could be available for future development.
However, the UDIA warned attracting buyers to live in those locations would be challenging.
The UDIA noted Queensland has shifted to a single agency for planning assessment which should cut red tape.
PERTH AT 10-YEAR HIGH
Perth’s lot production number is still riding a 10-year high after rising 31 per cent in 2012-13. The bulk of lots are being sold more than five months before final subdivision approval.
The median lot price has not changed despite a fall in the number of lots available and a decline in lot sizes which has masked the rise in cost per square metre – up from $162 in 2002-03 to $547 in 2012-13. Code reforms have allowed for some blocks as small as 100 square metres. The lack of future infrastructure funded for Perth has drawn industry criticism. The UDIA has warned the state would only be able to deliver on the strategies outlined in planning reform documents if new infrastructure was funded and well co-ordinated.
ADELAIDE HAS LAND APLENTY
Adelaide produced less lots in 2012-13 than for more than a decade, just 4761 compared to peaks of almost 8000 lots in 2007-08 and 2008-09.
Sales volumes have been low in recent years although there was a 15 per cent increase in 2012-13. At current consumption rates, there is considered enough land available to meet supply. While structure planning has improved around Adelaide, the UDIA said a lot of land was unavailable for development because of infrastructure issues.