Huge drop in demand for new house land

JUST how much the demand has dropped for new houses has come to light with the release of the Land Supply Survey by the Urban Development Institute of Australia.

According to the survey of 32 WA developers the number of lots sold during 2000 was 33 per cent lower than the previous year, chiefly as a result of the introduction of the GST.

In response, developers dropped back on the construction of new lots which were to be released within the next six months. The survey found the number of lots under construction fell more than 22 per cent to 6,604 during the year.

Peet & Co manager of land develop-ment and UDIA WA president Graham McArthur said the industry was already showing strong signs of recovering from the downturn. He said the introduction of the $14,000 new-home buyers grant had already resulted in increased enquires. He said developers were already reacting quickly by in-creasing the number of lots under construction.

During the December quarter the number of lots sold dropped 23.6 per cent. Traditional boom areas in the northern suburbs of Wanneroo and Joondalup had a drop off in sales of 30 per cent and 19 per cent respectively.

And they were not the only areas to feel the pinch, with Fremantle lot sales falling 90 per cent.

The Southern suburbs also recorded a drop off. Armadale lot sales fell 17 per cent; Canning slumped 45 per cent as did Gosnells by 21 per cent.

Urban Development Institute of Australia WA executive director Judy Carr said the signs were already showing that things were beginning to improve with the coming year expected to be very buoyant.

But the induced demand could be short lived with Ms Carr expecting sales during the first quarter of next year to drop back down to levels ex-perienced late last years. So the building industry could be back to square one.

Ms Carr said the developers had managed to keep lot prices very low during the past year through great efficiencies. She said it had been important for the industry to cut costs to maintain margins because the lots could only sell for what people were prepared to pay.

“They have the ability to react very quickly and I think that’s why land in Perth is so affordable. The industry can hold off constructing until there is sufficient supply and then they can produce lots at a price the market can handle.

Satterley CEO Nigel Satterley said many developers were caught out last year when they boosted the construct-ion of lots to beat the margin scheme which formed part of the GST.

When demand for lots dropped off after the introduction of the GST many developers were left holding blocks which money had been poured into.

Construction costs for a normal flat, sandy lot can still cost between $27,000 and $28,000 a lot.

“Generally I think there is not a land shortage. I don’t think we will see prices jumping for at least the next six months.”

For some developers it could take some time before they manage to recoup the sunk costs. Developers are also releasing lots in smaller stages to minimise costs and the risks associated with holding improved land.

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