Credit squeeze

METROPOLITAN land developers are predicting a significant shortage of housing lots later this year, as tight bank finance and the slow approvals process cause roadblocks in the development pipeline.

According to Satterley Property Group managing director Nigel Satterley, land supply is already contracting across the metropolitan area.

“You can see the shortage tightening now,” Mr Satterley said.

“From Wellard to Mandurah there is most probably 12 to 18 months of supply, in the northwest corridor stock’s tightened, in the eastern corridor, from Caversham up to Ellenbrook, the stock has tightened, from Canning Vale through to Gosnells, stock has tightened, and that City of Cockburn belt, the stock’s tightened a lot.’’

He said up to 40 per cent of blocks available to develop in WA were constrained by a tight credit environment for developers, which he predicted would continue for at least 18 months.

“Unless you’ve got 50 per cent cash equity, the banks won’t touch you,” Mr Satterley said.

“In the capital market, unless you have a track record and 50 per cent equity, there’s no credit. So that’s having a big effect right around Australia.”

Heath Development Company principal Colin Heath said Urban Development Institute of Australia members were planning only 4,500 new lots this year.

“There is a pool of lots at the moment, which is probably about 12,000, and we build 20,000 houses a year, so something’s got to give,” he said.

Mr Heath said the shortage of newly created lots was primarily driven by the banks, but added the federal environmental approvals process was causing significant delays in lot production, leading to an increase in land prices.

“It takes at least six to eight months to crank up from start on site to produce a title,” he said.

“We personally had a lot of trouble getting cockatoo clearances on our land at Dawesville, and we did an environmental offset, where we had to buy land elsewhere, and that’s what people are having to do.

“It makes it less profitable, and if you try and pass it on to the end purchaser the price has to go up.”