Sydney fringe epicentre of chronic undersupply of residential land: UDIA

Housing affordability is set to worsen in Sydney due to a “chronic” undersupply of land for new housing, according to the annual UDIA State of the Land Report.

The report labels Sydney as the most expensive market for residential land in Australia and calls for a federal government plan to ensure Sydney and other capital cities have a rolling supply of development ready to meet the demands of growing city populations.

“Unfortunately official information has not been released since 2010/11, but most experts believe [Sydney] retains the highest median lot price in the country,” says UDIA national president Julie Katz.

Nationally, the report delivers a damning verdict on the release of residential land for new homes in Australia’s major capital cities with Perth lot production down about 11% over the past 12 months despite an improvement in demand for houses.

The report found that the median size of lots has been gradually declining as a result of the scant supply and high cost of land with Adelaide the only city to have experienced a decline in median lot price and offering lots under a median size of 400 square metres.

Research from the National Land Survey Program (NLSP) carried out for the UDIA in November last year found that the average first home buyer is paying on average 30% more for a block of land and getting 36% less land than during the height of the property boom. 

According to the UDIA, Adelaide and Brisbane both produced the least amount of lots in a decade over 2011-12.

Melbourne is the only major land market with a healthy supply of new land, but paradoxically, where demand for fringe residential land is poor with around 30% of greenfield land being returned to developers by building companies and developers forced to offer hefty rebates and other incentives to attract buyers.

In Sydney, the situation is almost the exact opposite with not enough land being released to meet future demand.

On a positive note, the UDIA reports that land supply has improved in Sydney under policy changes instigated by the O’Farrell government and along with Melbourne is the only capital city market where lot production did not fall in 2011-12.

In her address to the UDIA National Congress in Melbourne today, Katz warned of an ongoing and increasing undersupply of land right across the national housing market that is having major negative impacts on the affordability of Australian housing.

"The Report clearly illustrates the growing gap between land supply and demand throughout Australia, and clearly outlines why fixing Australia's housing problems must be a major element of all Federal political party's economic and social policies." 

"The Report paints a concerning picture for policy makers around the country and especially for new homebuyers looking to enter the market, as the increasing undersupply of land and housing is putting substantial pressure on housing affordability." 

"It is well known that Australia's housing shortage is most severe in the affordable housing category.

The UDIA is calling for the federal government to establish a national strategic plan, requiring cities to maintain a specified rolling supply of development-ready land to meet demand driven by population growth

It is also calling for “federal funding to be linked to state governments establishing comprehensive land-use plans which are aligned with detailed, costed infrastructure plans and underpinned by delivery time frames”.

Other recommendations include:

• The Productivity Commission to undertake an inquiry into 'developer levies', assess the impact of these levies on broader based tax collections and investigate alternative methods of financing infrastructure
• Through the identification of leading practice, State Governments should encourage Local Councils and relevant State Agencies to reform the processes involved in assessing applications for development
• Conduct a thorough bi-annual audit of all Commonwealth-owned land in order to regularly update its Register of Surplus Commonwealth Land 

“What is desperately needed is a suite of Government policies which will bring about an accelerated, but more coordinated approach to serviced land release while simultaneously departing from the inequitable first user pays approach to funding infrastructure,” says Katz. 

According to Katz, housing issues appear to have dropped off the federal government and COAG's priority list. 

“The findings in the Report demonstrate a clear need for greater focus from Government on housing supply and affordability, not a winding back of commitments," says Katz.