I have published the first table in this post before.
It has been updated here, and the message remains the same, in that there is a heck of a lot of apartment and townhouse (mostly apartments) projects across south east Queensland that are approved but have yet to start construction.
As at March this year – the latest figures available – the relevant SEQ figures here are 4,100 projects; 121,000 dwellings or about 16 years supply, based on demand during the 2023 fiscal year. See table 1.
When I use this type of data during presentations, or in consultancy work, some say that this is because developers are land banking, and by extension, assume that the same trends apply to the subdivision market too.
Before we get into land banking, table 2 outlines the supply and demand status of new land subdivisions across SEQ.
It shows that some 59,000 lots have planning approval across SEQ, of which about 28,000 or 47% have operational works. Based on last year’s demand for such housing stock – being 11,250 residential allotment registrations during financial 2023 – the total approved allotments is just five (5) years supply, and when looking at the stock with actual subdivision approval (i.e., op works), this supply shrinks to just 2.5 years.
These figures are also as of March 2023.
Some locations, like Brisbane, the Gold Coast and Redlands have under two (2) year’s supply of land with subdivision approval.
When it comes to the subdivision market there isn’t any land banking going on across SEQ. The raw land supplies are way too tight.
Those that say there is don’t understand the land development business.
Land values on a rate per square metre basis within an active land estate, on average, increase between 2% and 4% per annum. In some years land values can also fall.
I have done many investigations on this topic and the outcomes rarely stray outside of the figures outlined above.
For many new land projects, the cost of holding the land plus the price to develop it often exceed the annual potential land value escalation.
Most, if not all land developers – and especially over recent years – would sell all approved land they hold if they could supply the completed allotments in a timely manner and at an acceptable profitable margin.
But they cannot, due to increasing delays in council approvals; rising costs and a lack of labour supply, materials and equipment.
A lack of demand isn’t the issue, it is supply.
Attached dwelling projects
When it comes to the attached housing market, there is a lot more development speculation than in the subdivision market; with out of town developers (more often than not) buying an apartment (or townhouse) site with the intent to flick the site, once it has an amassed DA, to the next sucker for a large profit.
Also, many attached dwellings projects just don’t work. Their approved product mix and sizes regularly miss the mark. The buyer value proposition is often way out of whack. Their locations are also frequently poor and their housing density in cloud cuckoo land.
I know this because much of my commissioned project advice work is helping a new attached dwelling project get the best market match, thereby reducing sales risk and assisting to bring the development to fruition.
Serious surgery is often required.
In addition, the expected dwelling yields for an area with a lot of new attached dwelling development often exceeds 25 dwellings per hectare.
At first glance, this dwelling density doesn’t seem like a lot.
Yet – as shown in table 3 – only a handful of our most densely populated suburbs are around the 25 to 30 dwelling per hectare mark, and on average, our capital cities, hold just 1.3 dwellings per hectare.
Most of us aren’t used to living in such tight confines and when we do, then such density is typically offset by very good locational amenity.
In summary, if you are going to build new dwellings at a high density, you need to get heaps right and it helps plenty if you have a kick-arse location.
Sadly, most approved higher density developments don’t.
And land banking – at least across SEQ – isn’t the reason why there is a shortage of approved allotments and/or land for sale.
Town planning’s opaque approval process and red/green tape are the core problems.
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