‘Affordability Just a Catchphrase’ in Brisbane Housing Market

Brisbane’s housing affordability is in crisis and its “up, not out” densification policy is falling short—but industry professionals say the opportunities ahead are more exciting than the outlook suggests. South-East Queensland will have its time in the sun in the next decade, Charter Keck Cramer national executive director Richard Temlett told the The Urban Developer ’s Brisbane Residential Developer Summit held on Thursday, May 14. “Demand is extremely elastic,” Temlett said. “Supply, however, is inelastic. It takes time to get the approvals. It takes time to build the projects out there, to settle them.” Compounded with construction price rises considerably higher than markets like Melbourne, the comparative affordability Brisbane once held over Sydney and Melbourne has well and truly eroded. Outer suburbs housing price shock Developers are now moving greenfield development in council areas further and further out as the urban footprint expands—highlighting the deficiencies of the “up, not out” approach. Home and land packages in outer Greater Brisbane suburbs such Rosewood and Park Ridge—historically low-entry-points—are now reaching $900,000 to $1 million, pricing buyers out. Despite the focus in the media and the halls of government, affordability is no longer achievable on the current playing field, Trask Land director David Trask told the summit. ▲ The New Communities in Focus panel at The Urban Developer ’s Brisbane Residential Developer Summit. “Affordability is just a catchphrase used by politicians,” Trask said. “We’ve got capacity to deliver more, but we’re got hands [tied] by approving processes all the time, and if it’s not council, it’s utility providers.” This was a universal sore point for developers, who pinned some of the industry’s supply woes on the expenses and hold-ups of infrastructure planning for new neighbourhoods. “The last five years has been nothing but a struggle with dealing with utility providers,” Trask said. “If there was actually a thread of accountability for affordable housing, politicians would be jumping all over that and making sure that those people do the job that they’re supposed to do.” And lack of supply is pushing affordability even further out of reach. Small lots, big prices Developers are turning to smaller lots, terraced homes and apartments to combat affordability pressures, but these are not the silver bullet some suggest. “When we’re creating smaller stock, it’s not because we want to,” Trask said. “It’s not because we’re trying to improve profitability. We’re being forced.” Council pressures to include further density are pushing projects to 45 homes per hectare, he said. “So we’re down to lot sizes at 60sq m to try to meet the density requirements that council wants to see,” Trask said. That’s compounded by land costs and construction cost increases, AVID Property group executive general manager Bruce Harper said. “I came back into the Brisbane office after two years away, and I felt a bit like Rip Van Winkle waking up and asking what happened? There was an increase in land price of 40 to 50 per cent over that two or three-year period.” ▲ Atrio’s Jaryd Collins and Gallery Group’s Alexandra Stuart-Robertson during the summit. Gallery Group chief revenue officer Alexandra Stuart-Robertson agreed, saying the industry cannot make even smaller lot sizes and typologies fit into the affordable basket. “The challenge that we hear from the land vendors is that it’s not cheaper to deliver a small lot, so the square metre rate for the land doesn’t make sense to actually achieve an affordable outcome,” Stuart-Robertson said. Small lots cost more given land price accelerations, and producing on small lots does not reduce developer costs via things such as planning constraints. “We’re delivering terrace homes in a corridor that are at $950,000, and we’re down to 5.5m frontages and 137sq m [in some places],” Stuart-Robertson said. “We have a design that will work for that, and I’m from the eastern suburbs of Sydney, so 5.5m frontages are luxurious in places like Paddington. But the land vendor is not going to be able to deliver that cheaper than a 400sq m block.” Supply challenges and market opportunities As Mecone director Phillip Cristaldi said, Federal, state and local government measures had delivered “modest” improvements to supply issues. “[But] their impact on affordability has been undermined by rising local government costs, in particular increases in local government rates and the extension of infrastructure charges to housing supporters that were previously exempt,” he said. And Collins said that many measures were “Band-Aids” on existing problems, which do not address issues such as infrastructure provision. “We need to look at this as a long-term structural change in terms of what the state, and those utility providers in particular, are responsible for,” Collins said. ▲ David Trask and AVID’s Bruce Harper during the summit on Thursday. But there is no magic wand to ensure affordability, as land and supply chain competition and construction costs continue to hurt the industry. “But if you want to be able to have a more affordable or affordable product or satisfy the customer base, it’s all about supply,” Harper said. And developers are foreseeing a price ceiling for what the market can absorb. “With house and land packages in places like Logan getting to just over a million dollars ... that’s pretty scary. If a buyer has a 5 per cent deposit and they’ve got a $950,000 mortgage, they’re going to be at significant risk when interest rates jump up,” Harper said. A mix of government initiatives smoothing the approvals process and provision of infrastructure and a forward-thinking and fast moving industry will ease this supply side problem. But the plus side for developers is that—for now at least—buyers are still buying. “Demand is still incredibly strong for our greenfield product in southeast Queensland,” Harper said. “We were told that was the top of the market two or three years ago. Now it’s a million, and people are still buying. We’ve still got queues of people lining up for our blocks of land in our house and land packages.” Growth will continue, but Temlett warned the industry to temper its expectations. “I don’t anticipate we’re going to get as strong growth that we’ve seen over the last couple of years, just because affordability thresholds are being reached,” he said. While it may come off the boil a little, Brisbane will remain at a simmer, so developers need to be poised to take advantage in the medium to long-term.

‘Affordability Just a Catchphrase’ in Brisbane Housing Market

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