New South Wales and Queensland are not releasing enough land to keep up with surging population growth, according to a new report.
Established areas will also need greater densification if the country is to keep up with current immigration levels.
The Residential Land Report from PEXA and Informed Decisions (.id) found that LGAs in NSW and Queensland would need to build thousands of new units to meet forecast demand in the next five years, with only Victoria currently releasing enough new land to meet dwelling growth in that time period.
Last financial year, settlements on new residential land fell sharply across all three eastern states – down 13.6 per cent.
While the total value of settlements across the states fell 7.4 per cent to $36.8 billion – slightly less than total volumes.
At the same time, ongoing high demand has seen a steep rise in the cost of vacant blocks, with prices in Greater Sydney nearing $500,000 for the first time.
The report found the average days from settlement were highest in Victoria, increasing to 385 days in FY23, up from 243 days in FY22.
While, NSW and Queensland were quicker to release land, with buyers waiting an average 275 days and 156 days respectively.
Victoria excelled at delivering high volumes of new vacant residential land relative to other states, with 33,847 settlements in FY23 (down 10.1 per cent) representing nearly one-in-five settlements in the state.
Queensland was successful in delivering land to market, with 24,226 vacant land settlements in FY23 (down 16.2 per cent).
However, the land released in many key greenfield LGAs, particularly in fast-growing Southeast Queensland, was below forecast dwelling growth.
NSW experienced the weakest new land supply, with just 15,828 vacant land settlements recorded in FY23 (down 16.4 per cent), well below forecast dwelling growth.
Settlement values for vacant land increased in all eastern states as volumes tightened, with new blocks in Greater Sydney up 13.5 per cent to an average of $489,764, new blocks in Greater Melbourne up 6.3 per cent to $288,607 and new blocks in Greater Brisbane up 9.4 per cent to $248,295.
The greenfield LGAs with the greatest need for more medium to high density housing, in the next five years, are Brisbane in Queensland (5035 units required) and Blacktown (1527), Liverpool (1135) and Camden (1614) in NSW.
Most greenfield LGAs in Victoria are meeting or close to meeting dwelling forecasts.
PEXA Head of Research Mike Gill said building a new home in a greenfield housing estate remained the preferred option for many Australians, particularly families and first homebuyers.
“They are drawn to the lower prices compared to established suburbs and the ability to build a large, new, freestanding home to their own specifications,” Mr Gill said.
“That’s why this analysis is so valuable as we seek solutions to address the nation’s housing affordability crisis.”
He said the report also looked at which council areas led the way in releasing land for sale, both in terms of volume and time from sale to settlement.
“This is important for determining whether we are releasing enough land, if we’re releasing it in the right areas and if we’re releasing it fast enough,” he said.
“The clear conclusion we can draw from the latest data is that there is a lot of room for improvement if we are going to meet the demands of a growing population – either by releasing more greenfield land or accepting that we will need to build more apartments in our urban centres.”
Mr Gill said given the surging population numbers, Australia cannot only rely on creating new supply in the urban fringes.
“What this report highlights is that we can’t rely solely on greenfield developments on our urban fringes to meet the housing demands of a growing Australia,” he said.
“People want to live in cities for access to education and employment, and it’s our cities that are best placed to deliver these services, as opposed to creating new and disconnected communities on our cities’ fringes.”
Founder of .id Ivan Motley said densification in our established urban areas is a necessary part of the housing mix, if we are to meet the demands of Australia’s forecast population growth, with the supply of affordable and appropriate housing, infrastructure and services that create well-supported and integrated communities.