New land sales constrained by supply issues
As outlined in the Land Report liftout last week, new land sales in Perth have dipped by 22 per cent in the March quarter.
According to UDIA WA’s Urban Development Index, 1880 new land sales were recorded in the March quarter.
While this figure is down compared to the increased activity prompted by the State and Federal Government building stimulus over the last two years, activity remains elevated compared with pre-stimulus conditions and is still nine per cent up on the five-year average sales volume.
UDIA believes that sales could potentially be higher if not hampered by the current skills and materials shortages, which have meant that developers have been constrained in their ability to deliver more land to the market.
If we look at construction levels now and the number of lots developers are expecting to deliver to the market in the next 12 months, it is not even close to the activity that was occurring in previous boom cycles.
According to our latest data, there are 3855 lots under construction and predicted for release in the next 12 months.
In the last boom, sales peaked at 2660 lots in the March 2013 quarter. Construction activity then peaked at close to 6000 lots expected for release over the coming 12 months in the March 2014 quarter.
Following the stimulus-led boom this time around, sales peaked at 3407 lots in the September 2020 quarter, but we have only seen construction activity hover at around 3000-4000 lots under construction over the last couple of years.
This shows that industry is not delivering at the same levels as we have seen in previous periods of high demand and provides further evidence that if demand continues, we could end up with a land supply shortage.
The State Budget last week was based on expectations that the Western Australian population would grow and the government has announced a range of strategies to attract more people to the state, both to fill skills shortages and in terms of international students.
This is necessary for our continued economic growth.
The initiatives included in the State Budget, including support for build-to-rent projects and expanding the Off-the-Plan Duty Rebate Scheme, are a great start to addressing the looming shortage but more needs to be done.
That starts with accurately tracking – in real time – housing supply and demand, so we have a better picture of where we are at in terms of supply meeting expected demand.
We also need to continue to streamline planning approvals systems, environmental approvals and a range of other measures that UDIA WA has recommended to make sure we are able to meet demand effectively and affordably.
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