Up or Out

I am a town planner by qualification and some practice.  I have been employed numerous times to determine forward housing demand and best matched dwelling supply.  I have done this for both private clients and, increasingly, in the public realm of late.

I write this introduction as a segue to advocate that what the official forecasts suggest is going to happen when it comes to new housing supply is often miles off what is happening now and likely to take place in the future.

Housing affordability and dwelling suitability disparities can be misunderstood but more concerning is that environmental, development feasibility and even existing town planning constraints are often not factored into the equation at all.

The press clipping below indicates that my firm was involved in an in-depth housing supply and demand study regarding greenfield land on the Gold Coast late last year.

In short, the official forecasts are way off the mark.

This is major issue facing not only the Gold Coast, but many urban locations across Australia.

The impact of not having enough land available for development negatively impacts local jobs; housing affordability; infrastructure, service and lifestyle provisions and even resident satisfaction.

Supply: Matusik chance ratings

Before I outline what, we found, I need to outline how we analysis potential housing supply in a study like this.  What we do is provide a chance rating.

We score each potential development site based on a high, medium or low chance of development success.  For example, for our Gold Coast work we used the following benchmarks:

  • High = 75% + likelihood of development between 2020 and 2041
  • Medium = 35% to 75% likelihood of development between 2020 and 2041
  • Low = Less than 35% likelihood of development between 2020 and 2041

See the postscript for more detail.

Greenfield dwelling demand

We also need to determine new housing demand.  Here we use annual dwelling registrations and we also break that analysis up by development density – typically by dwellings per hectare – as future housing supply outcomes are often set by such parameters.

On the Gold Coast and over the last five years, there has been a demand for some 2,375 new dwellings each year in the Gold Coast greenfield area.

Importantly most of this demand – some 85% or 2,022 housing starts per year – have been in new estates and projects with development densities under 20 dwellings per hectare.

Supply finding #1

Once you exclude the greenfield sites which are rendered undevelopable due to existing town planning and environmental constraints (this work was done by my study partners Zone Planning and BIOME Consulting) there are 22,673 potential dwellings available to be developed (in theory) across the greenfield areas on the Gold Coast.

These dwellings are hypothetically anticipated to be developed between now and 2041.

It is important to note here that some 23,000 potential dwellings (if you take the higher end of the official Gold Coast greenfield land supply forecast) have been excluded from development.  Much of this is to do with ‘desktop’ environmental constraints which when on the ground become irrelevant.

Of the 22,673 potential dwellings left, only 31% or 7,068 dwellings have a high chance of being developed over the 21 years.  A further 18% or 3,972 dwellings have a medium chance of development and a very high 51% or 11,633 dwellings have a low chance of development during the subject time frame.

Supply finding #2

The 22,673 potential dwellings are spread across 1,478 prospective development sites.

Only 4% or 55 sites have a high chance of being developed between now and 2041.  A further 13% or 188 sites have a medium chance of development.  An extremely high 84% or 1,235 sites have a low chance of development during the subject time frame.

Also, of note is the small size of the development sites, making it almost impossible for developers to amalgamate future sites and at feasible prices.

The high chance sites averaged just 9.3 hectares; medium chance sites averaged a low 0.9 hectares and the low chance sites averaged a piddling 0.24 hectares.

Supply finding #3

 When looking at the dwelling supply by expected dwelling density and limiting our efforts to those sites with a high and medium chance of happening between now and 2041 there are 4,134 dwellings under 20 dwellings per hectare and some 6,906 dwellings over 25 dwellings per hectare.

Our findings

There are 11,040 dwellings across the greenfield expansion area on the Gold Coast that have a high to medium chance of being developed over the next 21 years.

As noted above this breakdown of this potential dwelling supply by development density is 4,143 dwellings under 20 dwellings per hectare and 6,906 dwellings over 25 dwellings per hectare.

Over the past five years, there has been, on average, 2,375 new residential lots registered per annum across this greenfield area.

The breakdown of this annual average dwelling demand by development density was: 2,022 new lots registered under 20 dwellings per hectare and 353 new lots registered over 25 dwellings per hectare.

In summary, the 11,040 potential greenfield housing supply divided by the recent demand for 2,375 new dwellings each year equates to 4.6 years supply.

Yet the future supply of housing stock at development densities under 20 dwellings per hectare is tight (being 4,143) whilst the annual demand for such housing is very high, being 2,022 on average, over the past five years.

This equates to just 2 years supply.

End note

This, to me, is a real problem.

Many in the land development space have already left the Gold Coast and more will follow.  Jobs are being lost.

Many tradies and other Gold Coast employees are forced to live in more affordable and suitable accommodation some distance from where they work.  This means they are commuting long distances on the M1 and other major roads to get to and from work each day.

It seems to be getting worse on a daily basis.

Adding further angst is that much of the ‘real’ greenfield supply is in hands of a few developers and on just a few sites.

Price escalation is likely.  Home builders already face low margins, as the end house and land package price have a definite ceiling, yet land developers can (and are) increasing the price of the land.

The official reply to this issue has been its “up or out” – meaning “its high-rise housing or off to Logan or Ipswich you go” – but maybe that is the wrong attitude.

A better reaction might be to investigate the validity of the existing constraints to new housing supply in the greenfield areas, first, and secondly, look for ways to expand the greenfield land supply.

This should be done, not only on the Gold Coast, but throughout south east Queensland.

I have done enough similar work across this region in recent years to say, and with a high degree of confidence, that similar findings apply to most council areas across the south east corner of Queensland.

To get a copy of our report go here.


Postscript: Matusik chance ratings explained

The high chance sites are either already owned by development companies or are in areas where similar urban development is well advanced.

The medium chance category includes sites that are held in private hands and makes – in our opinion – some economic sense to redevelop.  Of course, this doesn’t take into account the owner’s intent or their expectation as to profit or timing.

The low chance segment includes sites which contain a very high expectation with regards to density.  Such sites are already hard to develop near the beach, along the light rail corridor and/or in existing established urban centres on the Gold Coast.  The economic reality and past track record suggest that high density development across much of the Gold Coast greenfield area is very unlikely over the next decade or two.

Also, sites which have an existing land use – like a shopping centre – have also been placed in the low category.  The chance that an existing retail centre in a greenfield location – and especially one with multiple owners and tenants – will be redeveloped into dwellings is low.

Likewise, sites which have been reduced dramatically in terms of dwelling yield due to environmental and other town planning overlays has also been allocated to the low pile as well, as these are probably no longer economically viable.

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