In Whitlam, blocks don’t come cheaply. Photo: Ian Bushnell.
Single-house lots are sitting on the market unsold because the high price of land is turning home buyers away from greenfield suburbs, the Housing Industry Association says.
The HIA says there is not an undersupply of land for single detached houses in the ACT, but once a home build is factored in, the price becomes prohibitive to homebuyers who are competing instead for established homes.
ACT and Southern NSW executive director Geordan Murray said the ACT Government’s development arm, the Suburban Land Agency, was inflexible in its approach and not responding to the market.
“Given that they’re a government agency and from a governance perspective, you’d expect them to have some good integrity around price setting, but as a consequence of that system, it is very rigid,” he said.
“They’ll revalue very infrequently, and the list price is the list price, and they’re very unresponsive to changing market conditions.”
Mr Murray said there had been little retreat from the huge price spike during COVID.
He said there were a lot of blocks on the market through the SLA, Ginninderry and other developments around Canberra.
“That’s just reflective of the very high price of land at the moment,” he said.
Mr Murray said a better mechanism was needed to establish the market price for these lots.
He said land prices in the ACT were considerably higher than over the border.
In premium suburbs such as Denman Prospect and Whitlam, the price of land was about $2000 a square metre.
For example, lots just released over the counter in Whitlam start at $475,000 for 246 sqm, falling in price per square metre the larger the lot size.
In Jacka, a 453 sqm block will cost $585,000, while a larger 681 sqm block is priced at $685,000.
Mr Murray said South Jerrabomberra and Ginninderry offered a slightly lower price point, but they were all considerably higher than cross-border estates such as Googong and Jumping Creek, which were both comparable in distance from central Canberra.
HIA ACT and Southern NSW executive director Geordan Murray says high land prices are holding back the delivery of new homes. Photo: HIA.
He said that, in addition to high land prices, homebuyers faced rising construction costs.
“When you factor those two significant increases, it’s created a situation where there’s quite a high premium now build a new home as opposed to shopping around in the existing home market,” he said.
“For a lot of households, that premium is a step too far, and as a consequence, we’re seeing more competition in the existing home market while these lots sit on the market.”
Mr Murray said builders report that their clients typically shopped around in the $900,000 to $1.1 million range, but building a house on the land will cost $1.2 million to $1.4 million.
“There’s quite a big gap there between the typical budget of households in that market and what can be achieved realistically after you’ve purchased the land, and what’s left on the table for a build.
“It just doesn’t stack up for a lot of households.”
The other issue was the difference in building-to-space ratio between small and large blocks (over 500 sqm).
For footprints below 500 sqm, the single-level home footprint could be 60 per cent of the block, but for large blocks, it was 40 per cent, resulting in many double-storey builds that incurred extra costs.
Mr Murray said industry sentiment remained poor despite an improvement in conditions over the past couple of months.
He said the spectre of another interest rate rise cast a shadow over builders.
“If we were to see further hikes throughout the year, we’d probably see the brakes go on the industry again,” he said.
But the high cost of land remained a barrier, and resistance to lowering prices to move blocks was delaying the delivery of new homes.
“There’s no imperative for the SLA to accelerate the delivery of any more lots while they’ve still got some or quite a few unsold,” Mr Murray said.
Greenfield homes might make up only 30 per cent of the ACT’s new housing mix, but they were still needed to ensure the Territory hit its target of 30,000 homes by 2030, he said.
