I have explained previously (here,here and here) how the ACT Government deliberately manipulates urban land supply in order to maintain exorbitant land/house prices.
Despite having an abundance of developable land, the Government has for a long-time drip-fed supply to the market, maintaining an artificial land shortage (scarcity) and, in the process, forcing buyers to pay high prices.
According to Domain (formerly Australian Property Monitors), the median Canberra house cost a whopping $625,092 as at September 2015, with the median house rent a ludicrous $450 – ludicrous because the ACT is effectively a large town with abundant vacant land in and around the “city”.
Indeed, a 2011 report from the ACT Auditor General found Canberra’s land supply policies to be lacking, resulting in a structural undersupply of land made available for development and deteriorating housing affordability:
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…the land supply and release process and programs to date have not been effective in achieving the Government’s stated objectives, which include meeting demand, providing affordable land and housing and establishing an inventory of serviced land….
ACT Government agencies have not used a robust model in identifying residential dwelling demand…
Agencies have consistently under-estimated the apparent demand for residential dwellings within the ACT, and ACT Government land release targets have been significantly and frequently revised upwards in recent years. Despite the current accelerated land programs, there was evidence of a shortage of the supply of residential land, capable of being built on, to meet the pent-up and on-going strong demand.
And over the weekend, we witnessed further evidence of this land-rationing process, with the ACT government flooded with more than 800 applications for 77 residential blocks released in the new suburb of Moncrieff on sale day last month. From The Canberra Times:
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The 77 blocks were released at 10am on November 9, with buyers securing the land by sending an email once the sale opened. The Canberra Times has heard from one buyer who sent his email precisely at 10am and says he was told it arrived at 10.01am. That put him in 275th spot – nearly 200 places outside the winning cohort.
The blocks, in a new suburb on the far northern edge of Gungahlin, sold for an average of $280,636. The cheapest block, at 287 square metres, sold for $206,000. The most expensive block, at 870 square metres, sold for $335,000…
Wow. $206,000 for a postage stamp-sized 287 sqm lot located in the back arse of buggery. How ridiculous.
The sub-text of which is that the ACT Government is operating a land/planning cartel that keeps land/house prices artificially high, to the detriment of younger Canberrans and those locked-out of home ownership, who are stuck paying inflated rents.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
