"Land prices are still too high, representing more than 50% of the price of the average home."
Stockland exposed as Gold Coast house-and-land activity falls to worst level in 30 years: Prodap
The Gold Coast house-and-land market has sunk to its lowest level in over 30 years.
Residential land and house-and-land packages sales totalled just 980 for the full calendar 2012 year, compared with a long-term average sales of 4,200 per year since 1995, according to the latest quarterly Prodap Report.
This is particularly bad news for developer Stockland, which is selling residential lots and house-and-land packages in six residential communities on the Gold Coast and has 35% of the market.
According to the Prodap Report, the three biggest residential development projects on the Gold Coast are all Stockland projects.
Stockland’s biggest is its Riverstone Crossing project in Upper Coomera, which accounts for 10% of the vacant land market on the Gold Coast. Land in the project is priced between $205,000 and $480,000.
Prodap reports just 22 sales over the December quarter in this project, though up from 15 in the September quarter.
Stockland acquired the 14-hectare site along the Coomera River in 2007 for $15.7 million with plans for 652 lots. To date 337 lots have been sold, with 15 still available and another 75 due to be released over the next 12 months.
Stockland’s two other major projects on the Gold Coast are Highland Reserve also in Upper Coomera, with 19 sales over the quarter (25 in September quarter), and Ormeau Ridge in Ormeau, with 18 sales over the quarter (down from 35 in the September quarter).
In its most recent market update in December, Stockland reported that the new housing market remained “poor” with a “negligible impact” from recent interest rate reductions. The introduction of the $15,000 construction grant available to first-home buyers in Queensland who buy or build a new home since September has also not had an impact on demand.
Stockland's head of residential communities, Mark Hunter, said market uncertainty and a lack of confidence were the biggest problems facing the market.
The Prodap report says there are over 2,800 lots that developers plan to produce over the next 12 months – not all of which will go ahead in the current market – adding that Stockland, Mirvac, Lend Lease and QM Properties have combined sufficient land banked to satisfy total market demand.Click to enlarge
Along with the drop in demand, the report quotes Department of Natural Resources figures showing that Gold Coast house prices fell by 4.5% and units by 7.3% during 2012.
Prodap Report author Bill Morris says such a “grim picture” of the new housing production market has not been witnessed since the 1981-82 recession.
Over the December quarter Prodap records 166 residential lots sales and 64 house-and-land packages sales – a total of 230 compared with 239 sales in the September quarter.
There are 1,117 vacant lots and house-and-land packages for sale on the Gold Coast, with Stockland the most heavily exposed, with 35% of the market.
“The sad news is that not even record low interest rates seem to have had any effect on the volume of sales. Sad but true,” says Morris, who adds that a reduction in council infrastructure charges had no effect on new production.
Morris says the problem is that established houses are cheaper and in many cases better located than new houses.
“In other words, replacement costs are higher than the price of older homes.
“Why is this so? Land prices are still too high, representing more than 50% of the price of the average home. This was not case 10 years ago, when the average serviced block cost $60,000. In 10 years that has risen to $220,000, almost 300% or 30% per annum” says Morris.
Morris says land prices have escalated out of all proportion to house prices over the past 10 years.
“There needs to be a new era of thinking about what level of services constitutes an 'acceptable' house lot. Do we need 'fully serviced' lots? Can we use septic tanks or package sewage treatment for individual lots?
“Should we continue to treat stormwater to very high standards, or should we 'dose' creeks with nitrates to neutralise phosphorous and nitrogen build up?” says Morris.