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‘Perfect storm’: The land supply crisis driving up SEQ house prices

house prices

Developers in SEQ house prices are growing increasingly vocal over what they say are looming land supply shortages in growth areas that are likely to drive house prices up further.

Their fears are the reason behind Deputy Premier and State Development and Planning Minister Steven Miles last week ordering his planners to identify a “pilot site” that will demonstrate how delivery of housing lots can be accelerated.

Official figures show supply is getting extremely tight in Redlands, parts of Moreton Bay and on the Gold Coast and Sunshine Coast.

The State Government has decided it needs to address the issue after discovering it takes an average of nine years for new masterplanned communities to be readied for new residents. Miles’ department is working on how to reduce that timeframe down to three years.

However, it is understood the Government remains reluctant to bow to demands from some developers to expand the so-called “urban footprint” to allow for new “greenfield” communities to soak up demand.

And local councils insist that their decisions are guided by the Government’s growth plan for the region which seeks to channel new development into certain areas.

The South-East Queensland Regional Plan, which seeks to influence how the region accommodates the estimated 75,000 extra residents it will attract each year, requires every council area to have a minimum of four years supply of housing land ready to go to market.

However, the Government’s latest land supply and development monitoring report, quietly released late last year, shows that while the region has more than enough planned housing supply to satisfy demand in the medium term, there are looming bottlenecks in certain areas.

Developers see the problem as particularly acute on the Gold Coast, which has just 1.8 years’ supply of approved lots, the Sunshine Coast (2.2 years) and Redlands (2.6 years). Brisbane is only a little better with three years supply of uncompleted lot approvals.

This compares with 6.6 years of supply in Ipswich and five years supply in Logan. These two council areas have the bulk of the region’s new masterplanned communities like Ripley Valley and Yarrabilba.

The latest version of the regional plan estimates south-east Queensland’s population will increase to 5.3 million by 2040, a figure that will require 30,000 new homes to be built each year.

However, these estimates were made in 2017 and do not take into account the surge in interstate migration in recent years or the impact of the pandemic on where people want to live.

Queensland Treasury is currently working on new post-COVID population projections for the state.

The developers’ position has been backed by the Government’s independent Housing Supply Expert Panel, which has called for swift action from state and local governments to resolve the issue.

The panel chair and director of estate agent Knight Frank, Julie Saunders, has warned that land supply shortages are a “repeating trend” in south-east Queensland.”

“At a time when leadership from government is crucial, bold moves are required to stimulate construction and ensure adequate land supply is available, both the State and local governments need to take a more instrumental role in areas facing this kind of bottleneck in land supply,” she said in a message accompanying the land supply monitoring report.

The panel has suggested no less than 17 actions for both levels of government to pursue to ensure adequate land supply, including unlocking under-used areas of the existing urban footprint.

The land supply issue is complicated, with land banking, fragmented ownership of land, density concerns and other factors affecting the smooth supply of housing lots.

Miles last week announced a new specialist team to tackle housing and infrastructure development, saying Government and local councils needed to keep up with the demand for land and not see families priced out of the market.

He told State Parliament on Tuesday that he had asked the team to identify a pilot site, the first new growth area, by the end of the month “because there is no time to wait”.

Development lobby group the Urban Development Institute of Australia issued a report last November saying that high demand and limited supply was driving up house prices.

The report, titled The Perfect Storm, said developers were reporting it was increasingly difficult to find land parcels of a “viable size” and that development approvals were becoming “less certain”.

“A continuation of the current approach will leave Queenslanders being forced to compromise or unable to purchase a home at all,” the report said.

UDIA Queensland chief executive Kirsty Chesser-Brown said the minister’s announcement was a “great first step” but more needed to be done.

She said the land supply and development monitoring report confirmed anecdotal evidence from her members that supply was tightening.

“What we are facing really is a perfect storm of returning ex-pats, strong interstate migration and the effects of the stimulus measure which has favour detached housing,” she said.

Local Government Association of Queensland chief executive Greg Hallam said the Government’s own land monitoring report showed the regional plan was working.

“In the growth corridors there’s a substantial supply of land there,” he said.

“It doesn’t mean to say the developer can develop or they can develop what they want to but that’s the nature of the regional plan.”

 

Article Source: inqld.com.au

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Market Place

Boomers a ‘Force of Change’ in Retirement Property Market

Property Market

As teenagers they invented pop culture and now—much older, collectively wealthier and arguably wiser—they are defining a new age group and re-inventing retirement living.

Millenials may have surpassed them in numbers but baby boomers are still having significant influence on world economies and trends—not least in the property market.

“The baby boomers are coming through and have become a force for change in the seniors’ market,” said Cameron Kirby, managing director of Kirby Consulting Group, a retirement and aged care specialist.

“The more progressive operators are definitely getting their ducks in a line.

“And there’s a lot of developers interested in dipping their toes in the market for the first time, some of them with more than 30 years’ experience in the development industry, because they can see there is huge opportunity.

“[But] many developers that want to enter into this space are probably a bit reticent because they’re worried about the complexity of it, they’re worried about the unknowns.

“The opportunities, however, far outweigh any of their concerns.

“And if you’re offering what the market wants, you’re going to be successful.”

Kirby will be a speaker at The Urban Developer Developing For An Ageing Demographic vSummit on April 28.

“The sector is continuously changing,” he said.

“You’ve got land lease communities and over-55 developments that have been moving into the traditional retirement village space.

“And, at the moment, there’s a lot of talk about integrated care in retirement living with a greater weighting on having more retirement villages and less aged care.”

Last year, a survey by benchmarking firm StewartBrown showed 58 per cent of aged care homes were operating at a loss, up from 55 per cent the previous financial year, and 32 per cent made a cash loss.

“Aged care has got some major challenges … but in the meantime there’s also the baby boomers coming through,” Kirby said.

“What I’ve seen over the last 10 years is a bit of a slide where low-care people that used to go into aged care are more likely to go into retirement villages and, equally, people that used to go into more traditional retirement villages are now probably more interested in moving into land lease communities and over-55s concepts.

“Land lease communities are growing very fast and are hugely attractive, there’s no doubt about that … but retirement villages have upped the ante enormously as well, they tend to offer much more wellness and are moving more towards the care side of things.

“Certainly, operators who are offering care in retirement villages are going from strength to strength.

“There’s an increasing amount of quality retirement villages with hotel and resort-style living and state-of-the-art amenities coming online. Pools, gyms, spas, saunas, cinemas, you name it they’ve got it. 

“But those retirement living operators that have a full continuum of care solution that’s what the market is demanding … [the boomers] know they’re going to need some support down the line so they’re planning for their future.

“It really doesn’t matter, however, whether you’re doing aged care, retirement, over-55s or land lease community … because demand is outstripping supply. There is a market for all of those and they attract very different types of buyers.”

Kirby said given Australia’s ageing demographic, the seniors and retirement market was a “much more defensive proposition” for developers.

“Just as healthcare is a defensive stock on the stock market, I think seniors living is a much more defensive play in the property sector,” he said.

“It tends to be more needs driven than what a straight-out residential property play would be.

“And so, I think if we are going to be headed towards a softer property market this is an area that can really shine because seniors will still have the wealth and will still want to move and look at downsizing opportunities.”

 

Article Source: www.theurbandeveloper.com

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Market Place

Houses still in high demand, apartment prices lag

apartment

The price growth of apartments continues to lag rocketing house prices in many suburbs across Sydney and Melbourne, with the trend showing little signs of abating.

The widening price gap between houses and units is a long-term trend driven by land scarcity in our biggest cities, with the difference tending to be widest between houses and high-rise apartments.

While house prices in Sydney’s North Ryde soared 29 per cent in the year ended March 31, unit prices in the suburb grew by a mere 6 per cent. Similarly, prices in Homebush grew 29 per cent, compared to unit price growth of just 7 per cent.

In Sydney’s Pennant Hills, house prices grew 24 per cent, while unit prices were flat, figures from CoreLogic show.

It is the same story in many parts of Melbourne, with Essendon North house prices growing by 19 per cent over the same period, while apartment prices fell by almost 1 per cent.

Houses in Melbourne’s Canterbury saw their prices jump more than 14 per cent, while units dipped 4 per cent. In inner-city Hawthorn East, houses were up 9.6 per cent, compared to a 6 per cent fall in unit prices.

Earlier analysis by CoreLogic showed more expensive property markets, particularly those close to CBDs and in areas where there are high numbers of units relative to houses, tend to have the biggest price gaps.

Eliza Owen, head of research at CoreLogic, says one of the reasons for the relative recent poor price performance of unit markets is COVID-19 related travel restrictions, including the closure of Australia’s international borders.

Demand for investment units in urbanised centres likely fell because of their high exposure to migrants and international students.

During the height of the pandemic, many units were empty, particularly in inner Melbourne.

The re-opening of international borders is seeing arrivals from overseas rising quickly, which should help to support the prices of units in both Sydney and Melbourne, she says.

However, Owen says one area of concern remains the prospect of higher mortgage interest rates, with prices of investment units more sensitive to rate movements than houses.

Many analysts expect the Reserve Bank of Australia to start increasing official interest rates this year, possible as early as June, with lenders expected to pass on any hikes in their variable rate mortgages.

Following two years of surging property prices, the big gains made over the past year appear to be over.

Sydney house prices were 0.1 per cent lower in March after being flat in February. Unit prices were 0.5 per cent lower in March and 0.3 per cent lower in February.

In Melbourne, house prices down 0.2 per cent lower in March, following flat prices February. Unit prices were 0.2 per cent higher in March and 0.1 per cent higher in February. However, those small gains came after big falls in inner-city unit property values during COVID-19 restrictions.

Coming off the back of strong annual growth, falling affordability continues to be a key factor affecting property market conditions.

A surge in the cost of living and rising rents is restricting the ability of prospective homeowners to save and borrow.

In last month’s federal budget, the government expanded the number of places available in its low-deposit scheme.

The program allows first-home buyers, and others, to buy new or existing dwellings with a deposit of only 5 per cent, instead of the usual 20 per cent that is needed to avoid paying expensive lenders’ mortgage insurance.

 

Article Source: www.brisbanetimes.com.au

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Brisbane

Brisbane house prices leave units in the dust

Brisbane house prices

The gap between house and apartment prices in Brisbane is now the widest in at least two decades, but is set to shrink over the next 12 months as housing affordability bites and buyers choose cheaper options, Colliers says.

Colliers residential director Queensland, Andrew Roubicek, said the price difference between houses and apartments in Brisbane has reached 45 per cent compared with an average of around 20 per cent between 2003 and 2015.

Brisbane house prices further escalated with the onset on COVID-19 when people placed a higher value on privacy with interstate migration to the Sunshine State also propelling Queensland’s property market.

Property data company CoreLogic estimates that Brisbane house prices increased 32 per cent in the year ended March 31 compared with 15 per cent growth for units over the same period.

CoreLogic said house price growth is slowing faster than units and Mr Roubicek predicted that Brisbane apartment values will rise by “at least” another 15 per cent in the next 12 months.

Mr Roubicek said rising construction costs have hit the new apartment market hard and that comparable established stock costs about 25 per cent less.

“There have been several examples of new developments achieving pre-sale [targets] only to have developers refund deposits and tear up contracts because building costs escalated to a point where it was financially unviable,” he said.

“As a consequence, developers who are looking to acquire new development sites are forced to increase their projected sales prices by around 20 per cent.

“Just 18 months ago a two-bedroom apartment in Brisbane might have sold off the plan for $9000 per square metre.

“But to build that apartment today the developer would need to achieve a sale price of $11,000 per square metre for the project to stack up.”

He said as result new stock is selling slower than established units, a trend that will play out through the rest of this year.

“The market is coming to terms with those newer prices and are seeing in the short-term better value for money in the established unit market.”

He said it is a similar scenario to when GST was introduced in 2000.

“When GST came into the market overnight the cost of housing went up 10 per cent and put more demand into the established market, where the prices of stock grew and the difference between new and second hand became narrower.”

Mr Roubicek said he believed the record price gap between houses and apartments will contract through the year.

“If you believe in history, if you believe in charts, and take a long-term view you would have to think that gap is going to narrow because everyone’s talking about affordability, everyone’s talking about interest rate movements,” he said.

“Natural forces will push what would have been a buyer of a detached home back into the unit market because of affordability.”

 

Article Source: www.afr.com

 

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