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194 | AUSTRALIAN HOUSE&GARDEN
Property
PLOT SPOILERS
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Australia’s housingcrisis comesback toland
availabilityand affordability, writesHarveyGrennan.A
ustralia is notoriousfor land
boomsand busts.Wehave beena
nation of speculators, punting on
capitalgains. First-timebuyers in capital
cities know onlytoo well the impact of
today’s ever-increasing land prices.
From 1910 upto the 1960s, land
values remained fairlystable. Then- boom! – they doubled relative to
the economy, as measured by gross
domestic product (GDP)between 1996
and 2015. The greatest surge was in the
period leadingup to theglobal financial
crisis of 2008. There was a lull during
the peak of the mining boom in 2011-12,
but now we’re back into boom territory.
Conversely, the‘residential structure’
component of housingvalues relative
to GDPhas remainedconstant since
- Volume builders such as Mirvac
are doing a good job ofkeeping
constructioncostsundercontrol.
“The housingbubble is a land bubble.
Every rise in real prices has led to a
downturn, with the exception of 1961-64,”
says Philip Soos of LF Economics, who
compiled the abovementionedfigures
forH&GG. “Only when it becomes difficult
tofinance repayments will the housing
and land markets finally capitulate.”
The International Monetary Fund,
among others, has argued that Australia
is in the grip ofa housing bubble. So what
happens when interest rates are nolonger
at a record low? Soos says the historyof
the past 150years will repeat itself.
Research on land values by CoreLogic
RP Data’s Cameron Kusher shows that in
2015-16, vacantlandprices roseby 8.1 per
cent in capital cities but fell 1.9 per cent
in regional areas.“The median selling
price for combined capital-city vacant
land is now 65-per-cent higher than
median prices in regional areas, the
biggest differential since 2003,”he
says. Capital-cityblocks, muchsmaller
than regional blocks, are about 230 per
cent more expensiveper square metre.
Thereisalso alargedivergence in
prices between capital cities, says
Kusher. Themedianlandprice in Sydney
is$ 4 22,000; in Hobart, it’s $160,000.
Over thepast 12 months, however,
Hobart had the highest relative increase,
of 20.3 per cent, and Adelaide the lowest
at 1.5 per cent ($205,000). A Sydney
blockis $1 3 7, 500 dearer than its nearest
rival, Perth ($28 4 ,500) with Melbourne
coming a close third ($255,000).
Risinglandprices in Sydney are
“dashingthe Australian first home
buyer’s dream”, says Michael Corcoran,
national president of the Urban
Development Institute ofAustralia. That
dream is now more likely to be a modern
terracehouse than aquarter-acreblock,
says Rob Stokes, the NSW Minister for
Planning. Kusher’s take on things is that
an increase in the amount of develop-able
land, with lowerfees and charges applied
to land development,“would likely reduce
land costs and potentiallyslow the
escalation in housing costs, particularly
in Sydney and Melbourne”. #Size matters
The median size of new housing lots in the outer suburbs of most
Australian capital cities is now less than half the traditional
quarter-acre block (the equivalent of just over 1000m^2 ).
Sydney 486m^2
Melbourne 479m^2
Brisbane 471m^2
Adelaide 377m^2
Perth 410m^2
Source: CoreLogic RP Data