Queuing for housing land in Sydney's farm paddocks

Land developers struggling to meet demand are bringing stock forward and implementing new allocation systems to cope with queues of would-be buyers... while worrying about land shortfalls in the longer term.

Buyers missing out on established houses are snapping up land as an alternative way of getting a foothold in the housing market, tipping demand past existing supply and spotlighting the serious likelihood of long-term shortages.

To meet current demand many land developers, especially in Sydney, are bringing forward releases of land by up to nine months.

Some are even pre-selling blocks --  in some instances before final planning approvals have been obtained and when the land will not be ready to be built on for, sometimes, up to a year.

But such measures mask a deeper problem. While developers point out that they have so far been able to meet short-term demand, they have concerns about how some capital cities will meet growth in housing requirements in the longer term.

David Glasheen, principal of the well-established Sydney-based land developer Handley Partners Property, describes land shortage as a "sleeping issue" for governments.

In Sydney, buyers began buying land off the plan in the second half of last year. It was something unheard of for land sales in the area until then.

But prices are another trait setting apart the current residential land boom – with some bigger blocks surpassing the $700,000 mark in some new developments, like the Blue Horizon Estate in North Kellyville, 40 kilometres from the centre of Sydney.

"When you consider the all-up cost of building a house on the land, you are looking at homes easily priced over $1.2 million," says Barry Goldman, managing director of Leda Real Estate, a Sydney-based agency. "This really is Blue Sky stuff."

The outer suburbs of Sydney are considered entry markets for first-time buyers, who form a smaller percentage of the buyers in today's market than previously.

When Handley Partners Property recently released 76 blocks of land for sale off-the-plan, the developer had expected to move four or five blocks a month. As it happened, it sold all the blocks in one month, including its most expensive block at $750,000.

Capitalising on the strong demand, Handley Partners has announced plans to develop another 100 odd blocks in a nearby site.

"We were inundated by some 300 registrations of interest," recalls Glasheen. "Buying off the plan is the only way to secure a block."

Glasheen says many of the buyers had been chasing established homes, but found they were outbid by more cashed-up shoppers.

"Some people are at their wits' end and they are turning to buying land to build a home. It is not their preferred option," he says.

Glasheen has been in the business for more than a decade, and his partner, Ian, has been for some 40 years. Neither has experienced a market quite like that of recent months.

UrbanGrowth, previously Landcom, owned by the New South Wales state government, says that for every block of land released, especially in a popular area, there are at least two, and often more, buyers.

Typically, there are 40 blocks on each release and up to 80 or more people would be chasing the land, says Robert Sullivan, UrbanGrowth's head of transition, who adds that UrbanGrowth has brought in a numbering system to stop buyers camping outside its estates.

"We would announce land releases several days ahead of the sale, which was usually on a Saturday, and in the past we had people camping outside our offices to be first in line," says Sullivan.

Sekisui House Australia, a subsidiary of one of Japan's largest housing builders, has also introduced a priority system to avoid having buyers camping overnight outside its offices.

Craig de Costa, Sekisui House's project director, says: "We are struggling to deliver the land to meet demand. We have brought forward releases by up to nine months."

Similarly, Stockland, the nation's largest residential developer, has launched new estates in recent months and is pre-selling land in what it describes as "paddocks" (before there is infrastructure or access).

Stockland's CEO Residential, Andrew Whitson, says the biggest driver for land is population growth. He agrees with other developers that employment growth, low interest rates and recovery in the residential market are all contributing to the strength of the land market.

Meanwhile, Housing Industry Association chief economist Harley Dale says demand for land is backed by a strong recovery in new home construction.

"Whenever we get an upturn in new home commencements, there is an elevated demand for land," says Dale.

Developers estimate that, in New South Wales alone, there is an accumulative shortfall of housing of around 100,000 homes after years of under-building.

UrbanGrowth's Robert Sullivan says Sydney requires around 40,000 new homes a year to support population growth. But in the last five to six years, new home construction fell sharply to 20,000 or 25,000 a year.

Dale says Australia takes in some 200,000 new migrants each year. He believes governments need to create the land to house Australia's growing population -- not just to meet immediate demand, but to meet demand over the next 20-30 years.