Skills shortage to impact housing affordability due to under supply of land. Image – Canva
  • UDIA (WA) report a 22% decline in land sales
  • UDIA (WA)'s CEO believes a skills shortage is at the root of the decline
  • If under supply of lots persist housing affordability may be at risk

The March quarter saw land sales dip by 22% according to Urban Development Institute of Australia (UDIA) figures.

While easing government stimulus measures may be a factor, the CEO of UDIA’s WA branch Tanya Steinbeck, believes skills and materials shortages are at the root of the decline.

Ms Steinbeck warns that the shortage is leading to an undersupply of land which could put housing affordability at risk.

1,880 new land sales were recorded in the March 2022 quarter, a figure down from the last few years of sales boosted by State and Federal government building stimulus.

Despite the decline, land sales activity is still 9% up on the 5-year average sales volume, which remains elevated compared with pre-stimulus conditions.

“The number of sales this quarter remains higher than the quarterly numbers that we were recording in the downturn between 2016 and 2019,” Ms Steinbeck said.

“In March 2019 we recorded 1047 sales. We are up at closer to 2,000 sales per quarter now and that shows that demand remains strong despite the end to government stimulus,” Ms Steinbeck said.

Stifling materials and skills shortages

Although sales numbers remain healthy, Ms Steinbeck cautioned that land sales activity is likely being stifled by skills and materials shortages.

She believes a skills shortage is hindering the preparation and construction of lots.

“The industry has been hampered by materials and skills shortages that have constrained the ability to deliver more land to the market.”

Tanya Steinbeck, UDIA WA CEO

Tanya Steinbeck, Chief Executive Officer at Urban Development Institute of Australia (WA). Image – LinkedIn

Lot development is high but could be higher

According to UDIA data, there are 3,855 lots under development and anticipated for release in the 12 months following the March quarter.

But Ms Steinbeck believes this figure should be much higher given the boosted sales activity from government stimulus since early 2020.

“If we look at construction levels 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,” Ms Steinbeck explained.

Land sales figures could be higher sales figures if the industry was able to deliver more lots according to UDIA. Image – Canva

Ms Steinbeck explains that the number of lots under construction was far higher in the 2014 boom.

In the March 2013 quarter, land sales peaked at 2660 lots. The peak of lots under development came in the March 2014 quarter when close to 6000 lots were expected for release over the following 12 months.

“Following the stimulus led boom this time around, sales peaked at 3,407 lots in the September 2020 quarter, but we have only been seeing construction activity hover at around 3000 – 4000 lots under construction each quarter over the last couple of years,” Ms Steinbeck said.

“This shows we just aren’t delivering at the same levels as we have done in previous periods of high demand and provides further evidence that if demand continues, we will end up with a land supply shortage as predicted,” Ms Steinbeck said.

Housing affordability at risk

The State government has announced strategies to attract more people to the state, both international students and skilled workers to address the shortages.

UDIA WA warns that this will not come without its own challenges as increased population places pressure on housing affordability.

Urbis Director David Cresp expects population growth to increase significantly over the next two years.

“If we don’t have the supply to meet this expected influx of people moving to the state, prices are likely to escalate and the rental shortage will be further exacerbated,” Mr Cresp said.

“Supply is already constrained due to the lack of materials and labour and if we cannot find ways to increase supply when demand picks up, it will put pressure on prices,” he said.

State budget: a step in the right direction

Although state budget announcements such as supporting Build to Rent and expanding the Off the Plan Duty Rebate Scheme are a great start, Ms Steinbeck said they don’t go far enough.

She believes more can be done to address housing and land supply shortages.

“We need to look longer term at streamlining the delivery of new land and housing in strategic areas to meet demand in the next few years.”

Tanya Steinbeck, UDIA WA CEO

“We also need to continue to streamline planning approvals systems, environmental approvals and a range of other measures that UDIA WA has recommended in our State Budget submission, in our Policy Priorities this year and in our recent Housing our Community report,” Ms Steinbeck said.

“One of the biggest factors to attracting people to Perth and WA is our lifestyle and relative housing affordability,” Ms Steinbeck said.

“Housing affordability will be severely compromised if we don’t get on top of the supply issues immediately.”

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