Developer land banking fuels Australia’s housing crisis

Prosper Australia has released a new report, which argues that deliberate land banking by developers has exacerbated Australia’s housing crisis.

The report tracked 26,000 sales in nine master-planned communities over the past 10 years on the outskirts of Australia’s big cities and found that developers have behaved like oligopolists, deliberately limiting the release of lots to the market in order to maximise their profits.

In turn, this land banking has cost home buyers $5.9 billion nationwide:

“Our report shows that despite there being over 110,000 approved sites, only 26,000 sites, or less than a quarter, had been sold over the past decade. Essentially, the slower the sales, the more developers make.

“Instead of land and housing prices falling as home buyers were promised, prices increased by an annual rate of 5.5% above inflation – even though 76.2% of estates were vacant.

“If developers continue to control prices like this, we could concrete over the entire nation and still not make a dent on affordable housing. First home buyers have been lured into Master Plan Communities under the false premise that supply is the key to their dreams.

“This control was most evident in 2017, when supply was building to a point where it could make a difference. Instead of prices falling as promised, developers in our study preferred to pull 48.7% of supply from the market. The record books show that 2017 recorded the highest increase in land values on record.

“This report highlights that the entire edifice of Australia’s housing policy focus on supply is only acting to make wealthy property developers more powerful…

“It appears that housing supply is the fair weathered friend of affordability. It is there in the good times, but as soon as the market sneezes, the rug is pulled out from the market.

“Forget red or green tape as the impost on prices. Developers instead prefer to hold the approved supply behind a gold tape that they only release when the market is buoyant.

“According to the sales ratios we have witnessed, it appears that these developments will take more than double the typical development framework to sell out, with some taking more than 40 years to complete”…

Across the study, practices such as this saw families and homebuyers pay an extra $194,000 for a typical site.

“This report shows that there isn’t enough scrutiny on developers who are manipulating the supply shortage to benefit from rising land and housing costs. If we want to actually address the housing affordability crisis in this country, we need to start prioritising supply delivery over land banking,” said Karl Fitzgerald.

This report beautifully pops the balloon of the lobbyist “its a land supply issue” mantra.

Companies that are designed to make obscene profits from selling land have arranged matters so that they can. That’s what profit maximising companies are all about.

Lobby the government for endless population growth via mass immigration. And then maintain a nice tight, drip feed of supply to reliably maximise profits. Too easy.