‘Cultural shift’ to ease supply concerns

Industry is moving to head off concerns of a housing supply crisis with developers, town planners and the state government collaborating to avoid a return of the skyrocketing prices of 2001 to 2005.

Residential land supply in the metropolitan area is forecast to meet only 90 per cent of demand in 2014, according to research by the Urban Development Institute of Australia, fuelling worries of a buying frenzy.

Supply is particularly tight in Kwinana, with just 80 per cent of demand likely to be met, and even tighter in the Swan Valley, where output is expected to meet just 67 per cent of forecast demand.

However town planning firm Rowe Group managing director Greg Rowe said the notion of land supply and the type of land needed in the metropolitan area was undergoing a significant structural change.

“There seems to be more and more a notion that Perth can grow with a mixture of traditional suburban house lots and medium and high-density residential infill and apartment-type living,” Mr Rowe told Business News.

“Because there seems to be a cultural shift towards that and more acceptance of it, it is actually a little easier to deal with land supply because you only need to create a smaller number of properties to create a larger outcome of accommodation and dwellings.

“If you open up different types of supply lines, and the market is willing to accept those different types of supply lines, you can tackle housing delivery on a broader front.

“It’s not now just about delivery of vacant lots, it’s about delivery of housing or accommodation in all of its myriad forms.”

Mr Rowe said Perth was undergoing a rapid transformation, borne out of planning reforms introduced in 2010 to encourage higher density development within existing metropolitan area boundaries.

Another significant set of reforms to be introduced later this year are changes to the WA Strata Title Act, which are being delivered by state government agency Landgate.

The reforms are designed to simplify strata titles so developers can supply the market with more diverse and flexible housing options and development uses, as well as align the Act more closely with the state government’s planning framework, Directions 2031.

Landgate is currently consulting with key stakeholders to define the elements of reform, while legislation is expected in state parliament in November.

“Industry is tackling (supply issues) by trying to do a number of things,” Mr Rowe said.

“One is to engage the agencies in a concurrent way, rather than a consecutive way.

“For years we’d just talk to the planning department, then we’d talk to the environmental agency, then we’d talk to the service agencies, and as we progress though, that means you simply prolong the process.

“We’re trying as an industry to persuade local governments, state planning agencies, service agencies, environmental agencies and infrastructure providers all to get together and talk at the same time.

“Now that’s not been easy; there has been a cultural resistance to that, but our task is to persuade all agencies to engage early and go together as a group.”

Roberts Day managing director Deon White agreed that the connection between land development planning and housing supply was closer than ever, which was particularly evident in the size of lots and increased density in new estates.

“That price pressure in terms of affordability is allowing the industry to be much more innovative in terms of the housing product they are putting out there,” Mr White said.

“From a planning point of view, it’s put some additional pressure on putting the right mechanisms in place to allow those smaller developments to occur.

“You certainly have to put a lot more finesse into it from a design point of view.

“If you are developing to the sort of densities that we now are in greenfields settings, it puts more emphasis on getting public streets and parks and the broader amenity like schools and shopping and those sorts of things in place.

“As long as the infrastructure and the quality of public space that we put in those settings is right, then it is putting the city on the right long-term track, and that’s getting a healthy balance of smart outer area growth and good quality infill development.

“It’s re-birthing the existing city, not just in terms of housing but also all of the businesses and facilities that sit with that.”

UDIA Western Australia chief executive Debra Goostrey said despite land being sold further and further back into the supply chain, the reduction in lot sizes meant developers had been able to largely contain price growth.

Median lot prices grew by around 6.6 per cent over the past 12 months, Ms Goostrey said, while the average size of vacant blocks fell by 5.1 per cent to around 410 square metres.

Ms Goostrey said she didn’t expect a return to the rapid price growth that occurred from 2001 to 2005, because of two major factors.

“One is the lack of speculators in the market,” Ms Goostrey said “People don’t think there is much headroom for prices to increase.

“The other is a lack of price sensitivity. So if land prices go up $500 you aren’t seeing more people jumping on product before the prices rise any further.

“The other wildcard is that in the last boom, people were rolling out lots in the range of 400 to 600 square metres, and there wasn’t huge diversity of product.

“People are now looking for those smaller segmented market pieces, which is masking any shortfall, because you aren’t getting everyone camping out for the same product.

“Everyone is looking for different things, so there are certainly challenges on the horizon, but it is missing some of the critical ingredients to make it the feeding frenzy of the last decade.

“It’s certainly tight, but the risk is more that the market may stall if prices start to go up, making an even worse situation in terms of our overall dwelling supply, rather than out of control price growth, so it’s a matter of keeping up supply.”