Property Australia

A shortage of medium-density sites looms large


Just six per cent of site sales in Australia’s major cities were suitable for medium-density and townhouse development last year, according to Knight Frank’s latest Australian Residential Development Review.

The total volume of residential site sales recorded was $5.1 billion in the 2018-19 financial year, down 38.2 per cent on the previous year.

High density sites comprised 73.1 per cent of all residential development sites sold by volume in 2018-2019, followed by low-density with a 20.9 per cent share, Knight Frank’s research finds.

“Medium-density or townhouse sites much suited to the downsizing population, and those priced out of the single dwelling market on the east coast, last recorded a six per cent share of Australian sites being sold for residential development in 2018-19,” says Knight Frank’s head of residential research, Michelle Ciesielski.

“In recent years, there has been substantially more land released for low-density in growth corridors of major cities. As a result, we’ve seen the uptick in first home buyers. However, there is still elevated demand for those looking for townhouse stock, especially at the top end of the market.”

Ciesielski says “strict lending criteria for buyers has now been loosened”, but access to “traditional finance” is still difficult for many local and offshore developers.

“As a result of project marketing being postponed, and in many cases construction commencements, the pipeline of new apartments tapers back significantly over the next three years, potentially not supporting the population growth projected for major Australian cities,” Ciesielski adds.

There was a decrease in offshore developers and investors buying development sites during the 2018-19 period, with a 47 per cent reduction from this group in sales recorded in the previous year.

China purchased 54.6 per cent by value, followed by Singapore (21%), Hong Kong (15.1%) and Malaysia (2.7%).

Greater Melbourne was the most popular capital city for investment by offshore developers and investors with a 68.2 per cent share of disclosed total residential sites. Greater Sydney followed with 27.3 per cent.

The report also found the sites sold collectively across Australia made up 20.2 per cent of total disclosed sales in 2018-19.

These collective sales include horizontal sites, with multiple homeowners banding together to form amalgamated residential super-lots; and vertically, with owners of individual apartments, office and industrial suites within a building.

“Vertical site sales have been more prevalent in NSW with the new legislation for strata properties coming into operation in late 2016,” Ciesielski explains.

“Since November 2016, a total of $1.45 billion worth of vertical sites have sold in NSW, representing 15.4 per cent of development site sales ripe for regeneration.

“The legislation has had a significant impact when compared to the previous 32-month period when only 2.3 per cent, or $364 million, were sold for this purpose.”