State and federal governments must create development-friendly policies and begin easing regulatory burdens around planning procedures for new building developments or the country will face an affordability crisis, the Housing Industry Association has warned.
The warning comes as new data compiled by the HIA and RP Data reveals the volume of land sales fell during the September quarter and was 57% lower than the same time during 2009.
HIA economist Matthew King says this indicates land is becoming unaffordable for many Australians, and says restrictive planning approval procedures are blocking more people from entering the market.
“Most land markets we’re seeing are experiencing contracting activity, and the volume of land sales deteriorating reflects declining affordability in Australia. Land is now becoming extremely expensive in many parts of the country.”
“Particularly we are seeing land becoming more expensive in markets such as Sydney, Melbourne and Perth. Interest rates have also played a party here, and they are set to increase.”
The HIA report shows the median value of land grew 2.8% in the September quarter to $186,629, representing a 5.2% increase over the previous year.
Values in capital cities grew by 5.3% in the year to September 2010, while value for regional areas grew by 4.4%.
But at the same time, the volume of land sales was found to be 57% lower in the first nine months of 2010 than in the same period in 2009.
The most expensive land markets were pinned as the Sunshine Coast, with a median lot price of $280,000, followed by Sydney at $269,000, Perth at $245,009, the Gold Coast at $230,000 and Richmond-Tweed in New South Wales at $225,700.
The least expensive land markets were Murray Lands in South Australia at $82,500, followed by Mallee in Victoria at $83,000, East Gippsland in Victoria at $83,250, Eyre in South Australia at $85,000 and Northern in South Australia at $85,000.
But King says when you take the most expensive markets and add other costs including fees, charges and the cost of construction, he says it’s easy to see how affordability is becoming an issue for more first home buyers and investors.
“The issue is that key markets like Sydney, Melbourne and Perth are becoming quite unaffordable. Unfortunately Melbourne could well become the most expensive housing city in the country.”
King says the issue is not necessarily a lack of developments, but the slow approval process which often takes years to have buildings finalised.
“The inadequate supply we’ve seen across much of the country is evidence of a government failure to achieve a timely supply of land for residential development. We’re not seeing enough land brought to market and that’s contributing to price appreciation in certain areas.”
There are plenty of improvements that can be made, King says, including making housing affordability a major policy issue, streamlining residential development planning and a restructuring of zoning laws to allow for more residential land developments.
“I think we need to see a higher prioritisation from government at all levels. We need to streamline planning processes, and we need to see a rapid release of land. That land needs to get to market much, much faster than is happening right now.”
“We also need to see reform around zoning procedures, because that land needs to be zoned faster, and it needs to be zoned as residential. If you have a steady flow of land for developments coming on the market, that can benefit affordability.”
King warns that if the status quo is maintained, then Perth and Melbourne in particular “could suffer from very high demand…and could see major price appreciation” over the medium-term.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
