A new report compiled by Monash University demographer Bob Birrell and VicUrban market research director Colin Keane has found that greenfield developments even in the typically cheaper outer suburbs are becoming more expensive.
The development comes as demand for property cooled over the weekend with each major city recording a decline in clearance rates compared with the last few weeks.
“I think we’re heading in the direction where the majority of new dwelling units will be in the form of apartments. So high-density living, as people can’t afford the typically larger house anymore,” Birrell says.
Birrell points to the relatively slow planning process as a key factor. Developers have complained for years that planning processes in every state are too slow and cumbersome, meaning markets aren’t reactive as they should be.
“The Government is going to be under pressure to try and truncate the planning process. They need to get stock on the market quicker, and developers need to actually get a hold on things rather than simply have it sit there.”
The new report has found that out of the four major greenfield markets – being south-east Queensland, Sydney, Perth and Melbourne – only two of those have the ability to offer affordable housing opportunities at high-volumes.
Only three of every 10 lots in new estates were able to be purchased by the average first home buyer, the report has found.
Perth is able to continue to provide affordable housing, with many lots priced below $200,000, but the report warns that it must continue providing developments so economic growth does not inflate prices beyond affordability.
Sydney now only accounts for 12% of total greenfield supply, and 11% of lots are priced below $200,000. South-east Queensland is heading in the same direction, the report found, with a lack of large scaled projects and the majority of projects being under 500 lots.
Melbourne’s capability to deliver affordable housing in greenfield developments has declined as the output from top 30 developer estates has fallen.
“As a consequence, stocks of finished blocks (not yet sold by developers) by the December quarter 2010 were reduced to less than two month’s supply,” the report found.
“The outlook for Melbourne is bad. The pipeline of large projects is unlikely to impact on the market until 2015.”
As a result, the report finds that Melbourne will lose “one of its key advantages in its recent record of sustained high economic growth”.
Birrell says while these complaints are nothing new, they highlight significant affordability issues that must be addressed.
“If we were to speed up the development of new housing and contribute more to getting land produced for homes, or increase the capability of the development industry, things could get better.”
“Developers have been crying out for years about this.”
However, auction clearance rates have fallen since last week indicating buyers may have some clout as demand falls – especially in Melbourne where over 2,700 auctions are expected over the next three weekends.
Real Estate Industry of Victoria chief executive Enzo Raimondo said the city’s clearance rate of 61% indicated that conditions “shifted slightly in favour of buyers again”.
There were 827 auctions on the weekend, of which 501 sold. This time last year there were 1,073 auctions, with a clearance rate of 85%.
In Sydney, a clearance rate of 60.9% was recorded from 237 reported auctions, with a total sales value of $129.4 million. Adelaide recorded a 34.4% rate, followed by Brisbane with a 30.6% rate.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
