Sales of vacant allotments in the Gold Coast fell from 818 to 626 (24%) in the 3 months to June 30, the result of record low levels of stock. Just 700 lots were available for sale at June 30, or just over 3 months supply.
Many of the major developers have chronically low stock levels, for example, Pacific Pines (10), Genesis (0) and Coomera Springs (13). Normally, these projects hold at least 50 lots each.
Developers cannot obtain their subdivision approvals and plans sealed quickly enough to stay ahead of demand. There are major problems in Council with 9 day fortnights and other "flexible" working arrangements such as 2 and 3 day weeks which benefit the employee but not the customer. If your application happens to be processed by a 2 day planner, you receive a reduced service accordingly. There does not appear to be a well developed system of job sharing within Council.
The effect of these stock shortages will be increased land prices.
Wednesday, September 26, 2007
Tuesday, September 11, 2007
BIS Shrapnel Come to Town
Economists BISS are reported in to-day's Courier Mail as blaming "greedy" developers for triggering a price boom of up to 40% within 3 years in Brisbane. Let's hope they were misquoted.
BISS are right in their forecast, but for the wrong reasons. Booms occur in cycles, generally every 7 years, as a result of the "natural" oscillations in the property market (the last boom occurred in 2002-3).This is a phenomenon of most capitalist economies. Booms are not caused by "greedy" developers colluding to exhaust supply in order to somehow distort the market with the aim of re-entering that market when prices have risen.
The building industry is very close to operating in pure competition. It consists of many players and subsidiaries, of different sizes, but mostly small operators who cannot afford to withdraw their services. They do not, and could not, contrive to run down supply to raise prices.
BISS are right in their forecast, but for the wrong reasons. Booms occur in cycles, generally every 7 years, as a result of the "natural" oscillations in the property market (the last boom occurred in 2002-3).This is a phenomenon of most capitalist economies. Booms are not caused by "greedy" developers colluding to exhaust supply in order to somehow distort the market with the aim of re-entering that market when prices have risen.
The building industry is very close to operating in pure competition. It consists of many players and subsidiaries, of different sizes, but mostly small operators who cannot afford to withdraw their services. They do not, and could not, contrive to run down supply to raise prices.
Monday, September 10, 2007
Queensland after Beattie
Anna Bligh will be a vastly different Premier than Peter Beattie. She is low profile, media shy, left wing, without vision, and she will not be her own woman. It is not certain that she will win the next election, even with a 50 seat majority.
Anna Bligh will return Queensland to those cautious Goss days when every activist group (especially the Greens) was listened to, and projects deferred rather than delivered when needed.
She will have a new Opposition Leader in Ray Stevens from the Gold Coast very shortly. He will out-manouvre her and gain alot of ground for the Coalition, possibly enough to win government at the next election, if not the following one. The new Parliament will be full of Independents, mainly disgruntled local Councillors ejected from the amalgamations.
In the interim period under Bligh, Queensland will stagnate as did NSW under Unsworth and Victoria under Kirner. The infrastructure program will lag, and Queensland will become known as the "anti-development" state. The term "Smart State" will be long forgotten.
It will take Queensland at least 5 years to recover.
Anna Bligh will return Queensland to those cautious Goss days when every activist group (especially the Greens) was listened to, and projects deferred rather than delivered when needed.
She will have a new Opposition Leader in Ray Stevens from the Gold Coast very shortly. He will out-manouvre her and gain alot of ground for the Coalition, possibly enough to win government at the next election, if not the following one. The new Parliament will be full of Independents, mainly disgruntled local Councillors ejected from the amalgamations.
In the interim period under Bligh, Queensland will stagnate as did NSW under Unsworth and Victoria under Kirner. The infrastructure program will lag, and Queensland will become known as the "anti-development" state. The term "Smart State" will be long forgotten.
It will take Queensland at least 5 years to recover.
Sunday, September 9, 2007
Queensland Migration On Track
Despite media reports today, principally in The Financial Review (page 3), that net interstate migration into Queensland had stalled, the reality is that numbers are in fact "on track". Net migration for 2006-7 was 29,500 compared with 45,000 in 2002-3 and 50,000 in 1994-5.
Migration is cyclical, and follows closely Sydney property booms. Sydneysiders typically visit the Gold Coast for family holidays and after some years make a decision to move to Queensland. That decision becomes reality when a target selling price is achieved for their Sydney property, coinciding with a Sydney boom.
Hence current interstate migration levels are between cyclical peaks, which is perfectly normal. Queensland's average growth rate is 2% p.a. or about 85,000 persons p.a. Overseas migration has grown at the expense of NSW and this sector is likely to push the numbers beyond 100,000 p.a. by 2015. This creates an underlying demand for 40,000 new dwellings p.a, more than any other state.
Migration is cyclical, and follows closely Sydney property booms. Sydneysiders typically visit the Gold Coast for family holidays and after some years make a decision to move to Queensland. That decision becomes reality when a target selling price is achieved for their Sydney property, coinciding with a Sydney boom.
Hence current interstate migration levels are between cyclical peaks, which is perfectly normal. Queensland's average growth rate is 2% p.a. or about 85,000 persons p.a. Overseas migration has grown at the expense of NSW and this sector is likely to push the numbers beyond 100,000 p.a. by 2015. This creates an underlying demand for 40,000 new dwellings p.a, more than any other state.
Thursday, September 6, 2007
Infrastructre Funding Is All Wrong
For years local Councils have recovered "headworks" charges by levying the developer his proportionate share of marginal water storage and sewerage treatment costs. The calculation was based on forecasts of likely amplification of dams and treatment plants within the city and pro-rata that cost over new lots created over a certain time. So all purchasers of new lots bore the brunt of headworks charges. If you were fortunate enough to have purchased an existing house or unit, you escaped the headworks levy.
This distortion in the allocation of costs went largely unnoticed until infrastructure charges sky-rocketted from $6,000/lot to $31,500/lot in the Gold Coast, for example, this year. The increase has been factored into new house prices, which had already increased in price due to supply issues.
Hence the distortion in cost responsibility caused by the old "user pays" policy has implications for the housing affordability issue.
A "whole of City" approach is needed for infrastructure charges, even though a more equitable policy may trigger higher Council rates across the board. It may be politically unpalatable, but then so is unaffordable housing. The magnitude of rate increases could be modulated by amortising the debt over the life of the asset (in some cases 100 years) and accounting for the future income derived from the asset.
The current financial system was devised in the 19th century by public service accountants intent upon inheriting debt free assets totally funded by developers and generating positive income streams in perpetuity. Nice if you can get it!
This distortion in the allocation of costs went largely unnoticed until infrastructure charges sky-rocketted from $6,000/lot to $31,500/lot in the Gold Coast, for example, this year. The increase has been factored into new house prices, which had already increased in price due to supply issues.
Hence the distortion in cost responsibility caused by the old "user pays" policy has implications for the housing affordability issue.
A "whole of City" approach is needed for infrastructure charges, even though a more equitable policy may trigger higher Council rates across the board. It may be politically unpalatable, but then so is unaffordable housing. The magnitude of rate increases could be modulated by amortising the debt over the life of the asset (in some cases 100 years) and accounting for the future income derived from the asset.
The current financial system was devised in the 19th century by public service accountants intent upon inheriting debt free assets totally funded by developers and generating positive income streams in perpetuity. Nice if you can get it!
Wednesday, September 5, 2007
Quarries Become Protected Species
The Qld government have caved in to the mining industry by designating 100 Key Resource Areas (KRA's) with associated quarry buffer zones of up to two kilometres. Houses or land located within buffer zones cannot extend or subdivide, nor can any new residential development occur. No compensation is contemplated by the government.
The previous buffer was 300 metres, and the onus was on the quarry to properly manage fly-rock by efficient drill hole orientation and use of approved blasting mats.Quarry licences are issued by local Councils on the basis that they keep fly-rock within their property boundary. However, the industry complained that fly-rock could not be consistently controlled.
Land values within KRA's are likely to tumble. There would be many cases where houses were constructed outside the 300m zone, but are now within the KRA. Surely a good lawyer will win an "injurious affection" case which will flow on to many others who have been disadvantaged by this legislation.
.
This is typical of the bullish legislation being pushed through Parliament before Beattie retires.
The previous buffer was 300 metres, and the onus was on the quarry to properly manage fly-rock by efficient drill hole orientation and use of approved blasting mats.Quarry licences are issued by local Councils on the basis that they keep fly-rock within their property boundary. However, the industry complained that fly-rock could not be consistently controlled.
Land values within KRA's are likely to tumble. There would be many cases where houses were constructed outside the 300m zone, but are now within the KRA. Surely a good lawyer will win an "injurious affection" case which will flow on to many others who have been disadvantaged by this legislation.
.
This is typical of the bullish legislation being pushed through Parliament before Beattie retires.
Tuesday, September 4, 2007
Urban Land Development Authority(Queensland)
The State Government this week will enact the ULDA which will have powers to "assemble land,assess and approve development and market land for development by the private sector."
The purpose is to provide sites for affordable housing in cases where the normal processes have stagnated. ULDA will either acquire the property or enter into a joint venture with the developer, and will sell the site with approvals. The profits will be ploughed into acquiring other sites. It all sounds too entrepreneurial for a government department- a bit like WA Inc.
The need for this drastic action highlights the shortcomings of IPA, the Integrated Planning Act(1997), which has been identified as the main cause of delays in rezoning approvals. It may have been easier and less expensive to amend IPA than to create another monster.
This is a strange case of a Labor government acknowledging the shortcomings of its administration and then duplicating what the private sector does best,ie identify, rezone and develop land. It is not something that a Coalition government would normally do, and is likely to be dismantled come the next State Election.
The purpose is to provide sites for affordable housing in cases where the normal processes have stagnated. ULDA will either acquire the property or enter into a joint venture with the developer, and will sell the site with approvals. The profits will be ploughed into acquiring other sites. It all sounds too entrepreneurial for a government department- a bit like WA Inc.
The need for this drastic action highlights the shortcomings of IPA, the Integrated Planning Act(1997), which has been identified as the main cause of delays in rezoning approvals. It may have been easier and less expensive to amend IPA than to create another monster.
This is a strange case of a Labor government acknowledging the shortcomings of its administration and then duplicating what the private sector does best,ie identify, rezone and develop land. It is not something that a Coalition government would normally do, and is likely to be dismantled come the next State Election.
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