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ISCOVER
Staff Reporter
Low interest rates and dwelling deficiency will support the land market in Sydney, Perth and south east Queensland, new research has revealed.
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According to BIS Shrapnel, there are green shoots starting to emerge in the demand for residential land in the Sydney, south east Queensland and Perth markets, with more positive signs through 2012/2013.
But according to the Outlook for Residential Land, 2012 to 2017 report series, lot production in Melbourne and Adelaide is expected to remain in the doldrums.
Recent protracted weakness in the Sydney, Perth and Brisbane markets – and to a lesser extent in the Gold Coast and Sunshine Coast markets – has created conditions for an upturn. Limited new dwelling construction has resulted in rising underlying dwelling deficiency, while affordability has improved considerably due to the combination of a weakness in house and land prices and lower interest rates.
In contrast, despite the lower interest rate environment, demand for land in 2013 is expected to remain subdued in Melbourne and Adelaide.
These two markets experienced the strongest residential rebound after the global financial crisis and the subsequent combination of high levels of land production and solid land price growth has meant there is little pressure on demand for new houses and land.
Report series author Angie Zigomanis said early signs for a recovery have emerged through 2012, with lending activity for new dwellings and to first home buyers on the increase in Western Australia and Queensland.
And although the data have been a little muddied in New South Wales by changes to first home buyer incentives, activity there also appears to be trending upwards.
“The rise in loans for new dwellings, although modest so far, suggests that a recovery in demand for new houses and land is beginning to emerge in these states,” Mr Zigomanis said.
“Moreover, the rising first home buyer demand, which itself does not necessarily translate directly to new house demand, will allow upgraders to more easily sell their existing dwelling and purchase a new house.”
The report series found that with the exception of Sydney, where lot production was flat, and the Gold Coast, where activity remains incredibly weak, all capital city and south east Queensland markets reported a fall in lot production in 2011/2012.
“The declines in lot production in the Melbourne and Adelaide markets reflect activity falling from unsustainable record levels, while the weaknesses in the other cities were the result of excess supply, weak underlying demand and constrained affordability after land prices had peaked in earlier years,” Mr Zigomanis said.
“These issues are now starting to wash through, with the recent declines in interest rates expected to be the trigger for a pickup in demand into 2013.”
