Where is the proof of a shortage. Complete <moderator: delete language> spruiker myth. Developers have stacks of vacant land that they're landbanking. If there was a shortage you'd expect to see a lot more homeless people, and a building boom as developers scramble to meet demand. The demand isn't there hence no real shortage.
This article nails it.
Link: Excessive house prices and the ridiculous supply myth, another spruiker myth busted.
Tom Kline.
Tom, you are entirely correct in saying that there are indeed plenty of developers landbanking at the moment. But I think you're forgetting that there are a few obstacles in the way of new land lots coming onto the market, most notably:- the difficulty to source finance, slow approval processes and high infrastructure costs. The same obstacles apply to infill development, probably to a greater extent.
I recently saw a presentation from Dr Owen Donald, who chairs the National Housing Supply Council (an independent research body that advises government policy), who informed the audience that the deficit (i.e. undersupply) of 'affordable' housing is going to continue to increase over the next twenty years, even based on optimistic delivery expectations.
He states that as of June 2010, there is a gap (based on medium projections) of 202,000 dwellings with the worst shortages in NSW & QLD.
Housing still remains unaffordable for many low-income households, forcing many to rent, driving rents higher and subsequently worsening the problem. At present, NHSC estimates a gap of approximately 500,000 'affordable and available' rental properties.
The key source of this growth in demand is high net migration levels.
What does this mean? Well, as an investor/developer, my focus is on developing smaller, quality housing (townhouses predominantly) in affordable areas, well serviced by rail, schools and amenity, that targets both owner occupiers (sub <$500k) and investors (>5% gross rental yields).
If you look at the world like a pyramid, the sad reality is that only a select few sit at the top… there will always be demand at the base of the pyramid.
Don't hesitate to email me if you'd like a copy of the slides from the presentation – [email protected]
Cheers, Adam.
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…….Developers not main land-banking culprit, says analystBy Bob Wilson, Hotspotting .com 28th October 2009
Blame for any shortage of land for housing development is usually sheeted home to developers, who are supposedly sitting on zoned, approved land awaiting a better market. But according to property analyst Michael Matusik, speculators are the more likely suspects, land banking with the aim of holding large parcels of land and on-selling the land in a stronger market. Matusik says developers have a different goal. They aim to make a profit, creating value by changing the land, not just holding on to it. The real issue with land banking, Matusik says, is the lag-time between buying raw land and then waiting for the development approval process to play out. “It is not unusual for the developer to come out at the other end with an approved project, yet be facing a markedly changed market,” he says. “Research has shown that in just five years, taxes, fees, levies and compliance costs have risen 300% to 400%. “Therefore the developer could emerge at some point with a fully-approved project, but it could cost more to bring the project to the market than the market is willing to pay. This is also known as ‘no market’ and, while developers hate to hear this, they’ve paid too much for the land in the first place.” So yes, land banking does happen, but it frequently happens in circumstances where the developer has no choice but to hold on to the land as there is no point in going ahead with an unprofitable project (or selling the land at a loss). The solution, Matusik says, is lower taxes and regulatory costs. Developers sometimes have to wait years for a development approval to emerge from councils, many of which are struggling to deal with backlogs of 12-18 months before the approval process (which itself usually takes 6-12 months) can proceed. And as real estate agents have found in the past two years, the hardest land to sell in a downturn is land which does not have a development approval.
There is a shortage of builders thanks to a lack of training of apprentices and the closing of Technical schools which helps with the shortage.
my takeaway from this is that supply does indeed follow demand but obviously at a significant lag (permits/building etc.) so therefore lack of short term supply helps support prices.
The article is a bit schizpphrenic. It say on one hand that supply has nothing to do with price and then the article author goes on to say that thank goodness we didn't have plenty of supply like the US otherwise prices would have fallen – thereby saying that lack of supply does indeed support prices…
I'm confused.
Another go nowhere article to sell papers
"Supply comes when the demand is present. The reverse side of this equations is that when times are tough building stops. So lets not believe the myth that supply leads the housing trends, when in fact, it actually follows."
Uhhhh?
Whatever, why waste your time on this tripe.
Quite a few bears inhabiting these woods now, pity they can't see the forest for the trees.
D
DWolfe | www.homestagers.com.au
http://www.homestagers.com.au
Email MeTom
my agent has 500 rentals on there books. None available NONE. Newspaper shows families struggling to find anything. Workers moving to town living at there work. People paying rent a year in advance just to secure a place.Sure there are estates on the outskirtsthat have room to expand at the developers whim. But the developers stop for a reason. There costs plus there margin = a block they can’t sell.
So your point is pointless.
Things will change eventually and how fast or big that change will happen is negotiable.But people saying there is no shortage…. Open your eyes. Denial does not change the facts.
Two ends of the market from my parts – a 10 yr old unit in pristine condition recently bought by an acquaintance was sold by a foreign investor who didn't live in it or rent it out. Another few bods I know cannot find a high end rental even though their budget is around $2k/wk (obviously location is a major factor here).
Go figure!
Demand will only increase in this country for the forseeable future. Its too hard to build, way to much red tape, taxes and interest rates getting too high to make it affordable. Just to get a simple building approval from council can take over a year. After you buy a "cheap" 200k block. you have just blown 20k on interest waiting for a simple turn key building approval from an outdated council system. Buying small places near ammenities sounds like an awesome plan Adam!
a complying development should take about 8 weeks. Don’t go for anything which doesn’t fit the box & you’re laughing.
The next thing you’ll complain about is how long it takes to build or that the paint doesn’t dry quickly enough.
Complying developments are generally the big housing estates on the outskirts. Sometimes you have to go through a bit of crap to come out ahead
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