Australia's leading provider of industry research, analysis and forecasting services, BIS Shrapnel reports that there is greater demand for residential land in the Sydney, south-east Queensland and Perth markets, with more positive signs to continue through 2012/13. However, lot production in Melbourne and Adelaide is expected to remain in the doldrums.

According to BIS Shrapnel’s Outlook for Residential Land, 2012 to 2017 report series, the continued weakness in the Sydney, Perth and Brisbane markets in recent times, and to a lesser extent in the Gold Coast and Sunshine Coast markets has created the conditions for an upturn. Low new dwelling construction has resulted in a rising underlying dwelling deficiency, while affordability has improved considerably due to the combination of the weakness in house and land prices and lower interest rates.

In contrast, the Melbourne and Adelaide markets are expected to remain subdued despite the lower interest rate environment. These two markets experienced the strongest residential rebound after the GFC, and the consequent combination of high levels of land production and solid land price growth has reduced the pressure on the demand for new houses and land.

Senior manager and report series author, Mr Angie Zigomanis says that early signs for a recovery have emerged through 2012 with lending activity for new dwellings and to first home buyers on the increase in Western Australia and Queensland. Activity in New South Wales also appears to be trending upwards.

Zigomanis explains that the rise in loans for new dwellings, although modest so far, suggests that a recovery in demand for new houses and land is beginning to emerge in these states. Additionally, the rising first home buyer demand will allow upgraders to more easily sell their existing dwelling and purchase a new house.

 Highlights of BIS Shrapnel’s Outlook for Residential Land:

  • All capital city and south-east Queensland markets with the exception of Sydney and the Gold Coast reported a fall in lot production in 2011/12  
  • Emerging upturn in Sydney, Perth and South East Queensland will be slow to gain momentum
  • Concerns about the outlook for local and world economy, as well as employment prospects expected to impact new house buying
  • Modest growth in lot production and minimal rises in land prices expected in 2012/13
  • Stronger rise in demand for new houses and land expected over 2013/14 due to likelihood of continued low interest rates and growth in residential markets
  • Melbourne and Adelaide to experience a period of weakness for demand for land
  • Lot production in Melbourne and Adelaide likely to continue to fall, with the possibility of further declines in prices, and/or increases in buyer incentives also occurring
  • Timing of next interest rate cycle to influence level of growth and length of market upturn in the residential subdivision markets
  • Recovery in residential building nationally expected to take over as the main driver of the Australian economy
  • Continued economic growth to be conducive to residential demand, with lot production rising to a peak in 2014/15
  • Current land price levels will keep some new home purchases out of the house/land market in favour of smaller, and more affordable, attached dwellings
  • Lot production forecast to end up well below its previous peak in Sydney and south-east Queensland and on par with previous peak in Perth
  • Residential activity forecast to enter a downturn over 2015/16
The detailed report including outlook for lot production by region can be accessed on the BIS Shrapnel website.