17/03/2021 - 15:12

Stimulus kickstart continues

17/03/2021 - 15:12

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Residential land developers hope the positive market momentum prompted by housing stimulus measures can be extended long term.

Stimulus kickstart continues
Nigel Satterley says his business is in acquisition mode, with plans to spend $300 million on land in Perth. Photo: Gabriel Oliveira

For many land developers, last year provided a welcome change to years of weak demand and subdued market activity.  

The state government’s Building Bonus and federal HomeBuilder grants introduced in June 2020 had an impact almost overnight, with Perth recording the most quarterly land sales during the June quarter since 1990, according to the Urban Development Institute of Australia WA (UDIA WA).

Overall, more than 10,000 new lots were sold in Western Australia during the 2020 calendar year, nearly double the number of sales in 2019.

Most of these lots were sold during the June and September quarters, sparking some concern that demand would soon fall away as quickly as it had arrived. 

(view a PDF version of this special report)

Data for the December quarter (the latest available data) could be an early indicator of this potential future, with WA sales falling by 43 per cent to just under 2,000 lots.

However, that volume remained above the rolling five-year average of 1,579 sales per quarter. 

The state government’s move late last year to extend Building Bonus on-site start times by 12 months has been one likely factor preventing a steeper decline in sales activity, helping to stretch out the delivery phase that enabled developers to pull forward more land release stages. 

For one of WA’s longest operating land developers, Nigel Satterley, the uplift in market confidence has been the largest force at play. 

“These grants have brought forward a lot of people who were sitting on their hands,” Mr Satterley told Business News

“This period would be the lowest volume of the state’s big booms.” 

Total greenfield lot sales in Perth have been declining since the 2013 calendar year peak of more than 13,700, dropping to about 11,800 in 2014, then 8,100 in 2015, according to UDIA WA data. 

During 2018 and 2019, Perth’s total annual greenfield land sales have hovered between 4,000 and 5,000. 

“I think we’re just heading back to normal now,” Mr Satterley said. 

“The market is readjusting.” 

Labour shortages, particularly in the civil works industry, was an ongoing challenge the industry would have to navigate, he said. 

Rather than seeing demand as another potential issue, Mr Satterley was confident buyer appetite would remain relatively strong throughout 2021, pointing to the state’s established housing market, where sales listings for homes in Perth have hit a 10-year low. 

Mr Satterley’s confidence has already translated to Satterley Property Group’s 2021 strategy. 

“We’re serious buyers, we’re in acquisition mode and would be ready to spend about $300 million in Perth,” he said. 

“Another thing we’re facing now is that, in lots of cases, it’s becoming cheaper to buy with these low interest rates than [to] rent.

“So, I think there’s enough work well into 2022. I don’t think we’re heading for a cliff.” 

Stockland general manager WA residential Col Dutton shares similar expectations, with the state and federal grants creating affordable opportunities for more people to enter the market. 

“We’ve seen strong land sales Australia-wide over the past 12 months, and a trend that doesn’t look to be slowing down any time soon,” Mr Dutton told Business News

“Our recent half year results revealed that in 2020 we had our strongest residential sales in four years. 

“We expect some moderation as the market absorbs this pull forward of demand. 

“But sales volumes will increase in the second half of the year in response to strong underlying demand and a lack of available housing stock, a rising established market and the lowest rental vacancies in the country.”

Sales activity 

UDIA WA chief executive Tanya Steinbeck said it was no surprise that locations in the north-east and north-west metro area were home to the highest number of new land sales in the Perth metro area. 

The most transactions during the 2020 calendar year took place in the City of Wanneroo and the City of Swan, with each area recording more than 2,400 lot sales. 

Prices remained steady, with the average price of new land in the Perth metro area rounding out the year at $240,650 per lot, 6 per cent higher than the same time last year.

“Development in these areas offers affordable land in locations that feature a good level of services and amenities for new residents,” Ms Steinbeck said. 

“It would also be the case that, longer term, larger land developments in the northern corridor would have been the focus of much of the government stimulus, given developers would have had more stock available for buyers to meet the tight timeframes for eligibility for the Building Bonus and HomeBuilder grants.

“While the north-west corridor experienced the highest number of sales, areas in the southern corridor including Armadale and Rockingham also performed well, spurred on by the stimulus.”

Ms Steinbeck said while the grants were welcomed by industry, the heightened level of market activity was unsustainable in the longer term. 

However, like Mr Satterley and Mr Dutton, Ms Steinbeck said the institute’s forecasts were not indicating demand would fall off a cliff, due to the expectation that record low interest rates were likely to remain until at least 2024. 

“UDIA now expects market conditions to stabilise in 2021 back to more sustainable levels,” she said. 

“Ensuring steady population growth in WA in the longer term will be critical for ongoing demand in the market. 

“Balance is the key to Perth’s future sustainable urban growth.” 

Part of that balance includes driving quality infill, with urban sprawl a perennial topic of debate for WA. 

“While UDIA is very supportive of quality infill in the right areas, there remains a need for new homes in affordable new communities, particularly to suit young families and growing households in need of extra space,” Ms Steinbeck said. 

“The idea of Perth’s urban sprawl continuing is somewhat of a myth, given the land earmarked under the state’s planning policies for urban development is already set.”

She said newly developed lots were within the target boundaries outlined under the state government’s Perth and Peel @3.5 million future planning frameworks, which provide future development direction for the next 30 years. 

It was also important to note that UDIA’s Urban Development Index was based on data received from surveys of greenfield developers, so was unlikely to accurately reflect how much housing development was taking shape across Perth’s inner-city areas. 

New infill housing was mostly driven by apartment or smaller ‘mum and dad developers’, she said. 

“At the end of the day balance is key, and Perth’s sustainable urban growth is reliant on a mix of development in new and existing areas that is well serviced by strategic, planned infrastructure,” Ms Steinbeck said. 

“Industry is also delivering a range of housing typologies in new areas, from micro lots and townhouses through to the more traditional size lots with a larger yard space, which assists in consolidating our urban footprint.

“Many people living in the outer areas actually work there too, it’s a myth to think that they’re all travelling into the CBD every day. 

“In fact, over the past few years the CBD has lost jobs, but there’s been employment growth in areas like Cockburn, Joondalup and Armadale.”

Future development 

With the Perth and Peel regions already extending 150 kilometres from Two Rocks in the north to Bouvard in the south, land availability could be an emerging challenge for WA developers. 

Although there are no set urban growth boundaries for Perth, the region’s footprint is determined by the Metropolitan and Peel Region schemes, as well as being geographically constrained by the coast and Darling Scarp. 

The Perth and Peel @3.5 million strategy was introduced in 2018, but a Department of Planning, Lands and Heritage spokesperson told Business News these planning frameworks would undergo a review this year. 

“Community and industry feedback will be important elements of this review process to ensure strategic planning can adequately meet the needs of future generations of Western Australians,” the spokesperson said. 

The planning frameworks govern strategic land uses, and a review could prompt more land within the city’s inner and middle rings to be rezoned for urban uses. 

In 2018, the Perth and Peel @3.5 million framework set a target of 47 per cent infill by 2050. 

“Based on new dwellings completed in 2019, the current net infill rate is approximately 43 per cent,” the spokesperson said.

“Greater infill development in strategic locations such as station precincts and transport corridors will help to limit urban sprawl.”

Traditionally a greenfields developer in WA, Cedar Woods Properties has recently diversified its portfolio.  

As a result of fast-tracking land releases amid the stimulus late last year, the group has jumped from eighth to fourth largest WA land developer on Business News’s Data & Insights, as ranked by the number of WA lots expected to be completed for sale this current financial year (see page 23).

The group is redeveloping the former 1.5-hectare TAFE site on Salvado Road in Subiaco into a mix of 41 townhouses and low-rise dwellings, the business’s first infill density project in Perth for several years. 

Cedar Woods managing director Nathan Blackburne said the first two releases of the project were sold out, with progressive price increases. 

“Infill projects are deemed by many to be too hard, due to communities that misunderstand these housing types, or do not see the benefits that diversity can give rise to,” he said. 

“A more proactive approach to facilitating urban infill opportunities on government and private landholdings is needed.”

To facilitate more infill projects, Mr Blackburne said a more dependable planning pathway was needed. 

Removing taxes to attract more foreign buyers was another potential lever to help boost infill development. 

“This will see more projects get off the ground, more rental stock to address current shortages and corresponding improvements in overall economic activity,” he said. 

Mr Blackburne said Cedar Woods’ sales levels had dipped at the start of 2021, but that sales across the group’s WA portfolio overall remained healthy. 

“We think conditions will remain positive at least for the medium term,” he said. 

“Demand will always exist for a variety of housing typologies and I think it’s important that we continue to cater for those different preferences. 

“The demand for townhouses and apartments is consistently high, demonstrating the desire for people to stay within the suburb they’re familiar with, but in a different housing form.”

Future jobs will also play more of a role in shaping Perth’s land development, according to Committee for Perth chief executive Marion Fulker

The committee’s latest FACTBase Bulletin, ‘Making Strategic Jobs Count: Addressing Issues of Spatial Inequality’, explores the relationship between employment trends and housing distribution. 

The report identifies two job types key to driving housing demand; strategic (i.e white collar jobs, largely concentrated in the CBD), and population-flowing jobs. 

Ms Fulker said decentralising the workforce from the CBD to neighbourhood offices, as the public sector had done with offices in Fremantle, was one example of how future jobs could shift housing requirements, particularly considering the influence of the COVID-19 crash course in remote working. 

“We are a metropolis or region with some very big challenges in front of us,” Ms Fulker told Business News

“Perth is a very low-density region in terms of job concentration and the number of people living on any hectare of land, and so the more we sprawl the more it costs our society in terms of infrastructure.

“To solve the problem of sprawl we need to have lots of neat infill solutions in the right locations.

“We don’t have these really big former industrial sites that we can go and mix up like we did in East Perth, so we’ve got to be really targeted about how crown land is used.”

The state government’s $227 million Subi East project is one example of accommodating more inner-city density. 

The project will redevelop 35ha of land, including the former Subiaco Oval and Princess Margaret Hospital sites, into a mix of medium and high-density dwellings. 

“Perth used to be very much ‘We work there, live here, play there’… we have to have more of that mixed-use approach on our doorstep,” Ms Fulker said. 

That wouldn’t come without some compromise she said, with Perth’s average lot size almost halving over the past 20 years: in 1999 the average lot size was between 600 and 700 square metres, reducing to about 378sqm in 2019.

“We’ve got mums and dads splitting the 1950s block, creating a quadruplex or duplex,” Ms Fulker said. 

“It’s definitely having an erosion of tree canopy. The big backyard isn’t there anymore. (See page 24.)

“That’s why public open spaces need to be working very actively for the community, so that people can recreate outside of their front door rather than outside their back door; there needs to be an area for kids to muck around, as well as parks, walkways etc.” 

Yolk Property Group is one developer getting creative with public open spaces within infill developments’ often tighter land restrictions. 

Last month, the group unveiled what it’s calling ‘WA’s first large-scale liveable street’. 

The liveable street will sit within Yolk’s Allure Estate in Fremantle, which is being developed in conjunction with the Department of Communities and BGC on the former Kinlock Primary School site. 

Yolk plans to position the 240-metre landscaped street on a conventional road (15 metres wide) with front-accessed homes on both sides. 

Features of the liveable street include a mix of seating and shaded areas as well as a climbing wall, BMX bike track, an insect hotel for kids and an outdoor library, among other things.

Yolk director Tao Bourton said the concept was inspired by Europe’s historic village streets, which were seen as an extension of the home. 

To accommodate the liveable street, the road will include a narrowed carriageway that Mr Bourton said would naturally lower vehicle speeds to favour safe pedestrian activity. 

The design centred around making streetscapes more functional, as a means to draw residents out of their homes promoting social interaction, as well as neighbourhood security. 

“The concept is also seen as key to combating loneliness of residents and tackle mental health issues stemming from isolation; COVID highlighted even more that loneliness is a massive issue,” Mr Bourton said. 

“This is about getting people more engaged, out on the street talking. You’ve got the 80 year olds sitting out on the piazza and families playing, it’s about bringing everyone together.

“Sales are stronger on the liveable street.” 

Like Satterley and Stockland, Mr Bourton expects WA’s land development to remain buoyant throughout 2021, despite the end of housing stimulus packages. 

“We’re having to fast-track stage two because we’ve run out of stock,” Mr Bourton said. 

“We’ve got buyers purchasing without getting the stimulus … we’re also still very affordable compared to the rest of Australia.

“So, do I think we’re in for a good time? Definitely.”

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