A lack of certainty about planning outcomes is halting the acquisition and development of sites for new housing, a survey by real estate investment house Wingate has found.
Of the circa 145 developers, private lenders and high net worth investors surveyed by the Melbourne-based firm, almost a third said securing planning approvals was a key development impediment, while over a third said the availability and cost of labour and trades was still a major issue.
Less than a fifth were worried about the higher cost of finance despite expectations that interest rates will continue to rise.
As a result of this lack of certainty, almost 50 per cent of respondents to the survey said they had no plans to acquire a site this year despite many seeing good growth opportunities in medium and high-density development, especially in Victoria.
Wingate managing director of property Mark Harrison said planning uncertainty had become a “critical issue” in the delivery of much-needed new housing, especially given much higher holding costs.
“The appetite of developers to buy large sites that can deliver medium and high density accommodation at scale is curbed because there is such uncertainty from the time you buy a site to when you get it approved,” he said.
Problems around planning identified in the Wingate survey were highlighted this week by inner Sydney architect Peter Lonergan who called dealing with local councils “a nightmare”.
“They are the reason why we’ve got the lowest housing approvals in our history, and it’s only going to get worse … it’s as if the councils can’t approve without interfering,” Mr Lonergan said.
In Melbourne, a number of low and medium-rise developments have been knocked back in the inner suburbs following rejections by local councils.
Earlier this month the Merri-bek Council in Melbourne’s inner north voted against a seven-storey apartment building in Brunswick which would have delivered 28 new homes, including three social and affordable homes.
In May, plans to develop five levels of apartments above a long-vacant pub in Clifton Hill were rejected by a Victorian planning tribunal after the Yarra City Council rejected the proposal.
The refusal to approve these projects and others comes amid a housing crisis that will likely get worse as migration picks up.
Housing Industry Association figures show starts on multi-unit dwellings – chiefly apartments – have fallen from a peak of 118,000 in 2015-16 to about 70,000 in 2022-23, while last month’s federal budget forecast the value of annual housing construction to fall to a 10-year low of $102.9 billion by 2024-25. At the same time, a forecast 1.5 million migrants are expected to arrive in Australia needing accommodation over the next five years.
“The interesting thing about our survey is 50 per cent of people see strong green shoots in the medium and high density space,” said Wingate research director Andrew Perkins.
“So you have this issue where the market identifies this opportunity, but then you have these planning constraints which developers see as among the biggest challenges in the market,” Mr Perkins said.
Add to that expectations of further rate rises, concerns around wages and other input costs and the result, he said, was “limited appetite [at the moment] to secure a site and go down the development path”.
David Scalzo managing director at Perri Projects, who took part in the Wingate survey, said planning challenges were not just about dealing with local councils, but the application process itself and the complexity around dealing with multiple authorities.
“It’s gotten worse in recent times,” Mr Scalzo said.
But he argued it was still a good time to buy sites provided you could “get safely through delivery part of the project”.
“The apartment market is a major focus for us,” Mr Scalzo said.
Andrew Herbert, development director at V-Leader, said the main challenge to do with planning were authorities’ unrealistic expectations when rezoning blocks for housing.
“They take a simplified view of it. We need to move away from counting numbers to working out what can be delivered to the market,” he said.