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Residential Building Activity in Sydney

An Overview and Seven Case Studies

Applied Economics
Prepared for NSW Treasury, May 2010

Applied Economics

With assistance from Alistair Robson

The NSW Treasury commissioned this study of residential building activity in Sydney in early November 2009. The study is based on seven case studies mainly in green field areas.

In the following six weeks before the New Year holiday break, the consultant met with personnel from six major developer firms, members of the Urban Development Institute of Australia and the Urban Taskforce, five local government agencies (covering six of the seven case studies described in this report), officers of the Department of Planning including two previous members of the Growth Centres Commission, and Sydney Water.

Following completion of the first draft, selected draft chapters were sent for comment to all developers and government agencies that had contributed to the draft in one or other way. Most of those firms or agencies provided comments on the draft chapters, often in some detail and always constructively.

Our report draws extensively on the contributions of the parties involved. In particular, these comments strongly inform the discussion of development and the case studies described in Chapters 4 to 11 especially.

Our thanks are due to all those who contributed in providing material or comments. It would be inappropriate to cite names. However particular thanks are due to Alistair Robson, NSW Treasury, who co-authored Chapter 2 and Annex A. Thanks are also due to other members of NSW Treasury who commented on earlier drafts.

However, the consultant is responsible for the report and for all the conclusions drawn.

Specifically, the consultant is responsible for the conclusions of the report in the Executive Summary and Chapter 12, for the analyses in Chapters 2 and 3, and for the major conclusions drawn from the regional and case study analyses in Chapters 4 to 11.

Dr. Peter Abelson

Applied Economics P/L

Sydney, May 2010

This study has three main objectives

1. To determine whether the low rate of residential building activity in NSW since 2000 reflects low demand for housing or low supply, or both.

2. In so far as the low rate of residential building activity appears to be due to supply side factors, to identify the major supply side constraints including any potential constraints caused by developer levies and other government charges.

3. To identify possible policy issues, especially those relating to state and local governments.

The report is based on (a) an overview of housing and economic indicators in NSW and the other states and (b) seven case studies of land and housing developments in Sydney mainly in Greenfield areas.

Of the case studies, two are in north-west Sydney (in the Hills Shire and Blacktown local government areas); three are in south-west Sydney (two in Campbelltown and one in Camden); and two are in established areas (in the City of Sydney and in Pittwater local government areas).1 Thus the case studies involve six local government areas.

In a separate recent national study, Applied Economics has reviewed 8 case studies of multiunit developments in Sydney (3 developments in Botany, Canada Bay and Manly), Melbourne (3 developments) and Brisbane (2 developments).2

The level of building activity

Whether measured by completions of new dwellings or expenditure on housing, building activity has fallen significantly in NSW and in Sydney over the last 10 years. To cite some key examples:

● Since 1999-2000, completions of new dwellings in NSW have almost halved.

● Within Sydney, completions of detached and multi-unit dwellings fell from 32,358 dwellings in 1999-2000 to 14,795 dwellings in 2007-08.

● Between 2005/06 and 2007/08, fewer than 4000 new houses per annum were constructed in Sydney.

● Since the late 1990’s, the value of residential activity in NSW has fallen from 36% of Australian output to just over 20%.

Some of this slowdown reflects slow growth of income and population. GSP per capita has risen slightly less fast than the Australian average since about 2004/05. Also, the population of NSW and Sydney has grown more slowly than in the rest of Australia since 2001.

The slow growth in population may also have reflected the high cost of housing, as house prices rose substantially in Sydney up to 2004. Thus the low level of housing may be cause as well as effect of low population growth. However, the high house prices should have induced a supply response. Sorting out these interactions is beyond the scope of this report.

This report finds that the slow growth in GSP per capita and population do not fully explain the substantial slow down in residential building activity. Households are still willing to pay high prices for housing in Sydney and for alterations and additions. Supply side constraints on new housing activity are responsible for much of the slow down.

Causes of the low level of development

The low level of development has many causes. In the words of a very experienced developer: “There is no single cause. If there was only one issue, we would have solved the problem by now”.

From our case studies, the following are the main reasons for the slow rate of development.

● Natural geographical constraints. There is a shortage of available development sites and land for housing in areas of Sydney where most households most want to live.

● Community preferences for continuing low residential densities, their defence of their environment and opposition to development.

● Local government agencies tend to favour and produce restrictive land use plans which limit the application of capital to land. Planning processes are slow and lengthy. In the last 10 years, only a small amount of land has been rezoned for housing, although rezonings have increased in the last two years.

● The planning process is full of vague and ill-defined statements. Consequently planning decisions are often subjective, uncertain and hard to predict.

● A lack of commitment of some state agencies to development, which also results in restrictions on building activity.

● A lack of public infrastructure, principally of transport but in some cases for water.

● High englobo land prices deter development. This is partly a reflection of high house prices. However, for various reasons landowners are often unwilling to sell their land to developers at prices that allow viable development. Landowners expect to accrue all the profits from development and are often not aware of the full costs of development. Sometimes landowners are influenced by historic high prices that are no longer relevant. Sometimes they simply do not want to sell and move.

● In addition, landowners do not pay for the full opportunity cost for occupying rezoned land. While rates are payable on the additional rezoned value of the land, they are levied at the lower rural rate (where this exists) where the rural use is the current main use of the land instead of at the higher general rate. Moreover landowners can postpone paying rates on the uplift of value due to rezoning until the land is actually developed and any rate payments more than 5 years old are written off.

● Fractured land ownership is a major constraint on development. Fractured holdings are a major feature of land holdings in recently released and rezoned areas all around the existing western fringes of Sydney (the major greenfield areas). In conjunction with high land values, developers find it hard to acquire commercially viable consolidated land holdings. Development of fractured holdings is likely to be slow.3

● Government policy discourages development of areas that are in consolidated ownership but which are separate from existing developed areas and that are likely to incur high infrastructure costs. This may be appropriate but the evidence base is slim.

● Several of these factors contribute to high transaction costs for developers, increase the cost of development and make Sydney a relatively unattractive place for development capital compared with other major cities despite the high market price of housing.

.

In recent years there has been a substantial increase in the amount of land released for housing. This may lead to a significant increase in rezoned land in the next few years. However, much of this land is in areas where demand for housing is low and house prices are relatively low and / or where land ownership is fractured.

State and local developer charges sometimes appear excessive in relation to services provided. However, they tend to reduce englobo land values and generally do not constrain development. Only in a few cases do these charges make development uneconomic.

Policies

The report finds that the demand for new housing in Sydney is likely to be between 25,000 and 50,000 dwellings per year. These housing targets are not achievable with current activity constraints unless there are significant policy changes.

However, the state government has a policy choice. The government could decide on a low population policy. It would do so primarily with the objective of preserving the environment of existing communities. The implication would be a low housing completions policy.

But a low completions policy would come at a cost of escalating house prices. The government can control the net increase in the Sydney population by allowing house prices to increase. But it cannot control the number of people who want to come to Sydney and therefore the demand for housing in Sydney.

A restrictive housing policy would also have negative impacts on economic growth and incomes in Sydney and NSW. Thus it is not the state government’s policy to restrict new housing.

It is also evident that the government cannot solve the housing problem by zoning more and more land for housing over 60 km from the city centre and the coast. Such housing will suit a number of households. But this strategy is expensive and it will not accommodate the preferences and demands of most households living in Sydney or wanting to live in Sydney.

Therefore, to accommodate a significant increase in the population of Sydney, means will have to be found mainly in established housing areas. This is well understood by the Department of Planning. If Sydney is to accommodate an increases population at a rate of say 1.5% per annum, over two-thirds will need to be accommodated in established areas.

This implies that the population in established areas will have to increase overall by over 20% in 20 years or equivalently that population density will increase by over 20% in 20 years. This is a significant challenge for many areas.

What policy issues follow from the case studies and this analysis?

● Fundamentally, it will be necessary to apply more capital to land. This will involve building higher and building more cleverly in established areas. More research into how this can be achieved is a priority.

● Market forces should guide planning and development but not dominate it. Councils should use planning controls to meet specific environmental objectives but be cautious about using them for social engineering objectives.

● The NSW Government will need to explain the population and housing choices, the implications and the preferred outcomes. There needs to be improved communications between the three main parties: the state and local government and developers.

● Councils need to commit to housing targets and develop policies that developers can count on. Confidence and consistency are critical for developers.

● State agencies need to be coordinated so that there is a consistent “whole of government view”.

● The rezoning process should be made more efficient, shorter and more certain.

● Where a local council and a developer disagree about a proposed rezoning, there should be some avenue for independent review of the proposal.

● Transport solutions will be essential in established and greenfield areas. Local opposition to development is often based on the concern that development will make existing traffic congestion worse. This is likely to mean developing around rail stations and pricing of roads, among other solutions.

● Precinct boundaries and arrangements for Precinct Acceleration Plans may need to be re-examined.

● Rating concessions for land that has been rezoned should be reviewed so that landowners pay rates that more properly reflect the opportunity cost of the land that they are occupying.

● Given the problems with developing land in fractured land ownership, the government may have to consider ways to consolidate key sites, possibly by compulsory acquisition of some sites and master planning the area.

● Within established areas, the Government may have to be prepared to allow strata plans to be demolished with a 75% or 80% agreement of the owners.

Clearly, the last two policy options raise significant issues for the rights of property owners and would be applicable only where the public interest was demonstrably strong.

Given the high demand for housing in Sydney, the land constraints in the areas where households want to locate, and local opposition to increased densities, solutions will require research, creativity and good communications.

1.1 Study Objectives

This study has three main objectives

1. To determine whether the low rate of residential building activity in NSW since 2000 reflects low demand for housing or low supply, or both.

2. In so far as the low rate of residential building activity appears to be due to supply side factors, to identify the major supply side constraints including any potential constraints caused by developer levies and other government charges.

3. To identify possible policy issues, especially those relating to state and local governments.

The report is based on (a) a macroeconomic overview of housing and economic indicators in NSW and the other states and (b) seven case studies of land and housing developments in Sydney.

Most of the data needed to analyse levels and trends in residential activity and the main demand drivers, such as gross state product (GSP) and population, were available from routine statistical sources, especially from the Australian Bureau of Statistics (ABS).

Regarding the case studies, two are in north-west Sydney (in the Hills Shire and in Blacktown Council area); three are in south-west Sydney (two in the Campbelltown Council area and one in Camden); and two are in established areas (one in the City of Sydney and one in Pittwater). Thus the case studies involve six local government areas.

The case studies were generated from discussions with the Department of Planning, industry bodies such as the Urban Development Institute of Australia and the Urban Taskforce, and major development companies. In so far as the case studies were developments that major developers identified, there is a risk that the sample is biased towards development difficulties and not be representative.

However, in nearly all cases the developments were discussed in detail with the relevant local and state planning agencies.

Both developers and planners were generally willing, and indeed keen, to discuss wider issues and examples. Thus the report does discuss many of the major general issues in residential development in Sydney and the conclusions are considered reliable.

However, this report was designed to meet limited objectives in a short time period. Neither the consultations nor the analysis are exhaustive. For example, consultations have not been held with transport agencies or with the City of Sydney Council. The conclusions should be regarded therefore as indicative and subject to further discussion and analysis rather than final.

1.2 Structure of Report

Chapter 2 provides an overview of residential building activity in NSW and the main demand drivers. Although some of the low level of building can be ascribed to the low growth of economic activity (as measured by GSP) and population in NSW, the chapter concludes that supply-side factors have been the major factor behind the relatively low level of building activity.

Chapter 3 discusses the major demand and supply factors driving residential development in Sydney both in aggregate and by location. This chapter also describes the process whereby supply is produced.

Chapter 4 provides an overview of residential planning and development in the two major Greenfield development areas in Sydney, to the north-west and south-west of the city. This provides a context for the case studies in these areas and provides additional information and insights in various other development areas.

Chapters 5 to 11 describe and discuss the seven case studies.

The final chapter brings together the main findings of the case studies and discusses some policy implications.

2.1 Introduction

In this chapter we describe the level of residential building in NSW and Australia from 199091 to the present, discuss the major drivers of residential building namely population and income growth, and discuss movements in real house prices. This provides a context for the next parts of the report. In particular it demonstrates the slow down in construction of detached housing and, to a lesser extent, of multi-unit housing in Sydney. The report finds that this slow-down cannot be explained fully in terms of the slow down in demand. Rather it appears that there have also been constraints on the supply of housing.

It should be noted that the aim of the chapter is not to explain short-term or national trends in housing construction that may be affected by such factors as interest rates and short-term homeowner subsidies. Rather the analysis is concerned with medium and long-term, interstate, comparisons. Also the chapter does not attempt to provide a fully modeled analysis of housing starts or completions. Such a modeling exercise is beyond the scope of this report.

The chapter is supported by several detailed tables in Annex A. In Chapter 3 we explore some supply-side reasons for the slow down in residential construction in NSW with a focus on detached housing.

2.2 Residential Building Activity in NSW and Australia

Residential activity can be measured in physical terms such as completions or in dollar terms. Measures like completions provide a readily understood indicator of activity or achievement. But when physical units are not standard or strictly comparable, expenditure on housing is also an important measure of activity. This is especially so when expenditures on alterations and additions are an important part of changes in the housing stock, as they often are.

Figure 2.1 shows indices of completions of private houses and units from 1990-91 to 2008-09 in NSW and the rest of Australia with 1999/2000 equal to 100.0. In Annex A, Tables A.1 and A.2 show the numbers of completions of private houses and units and the respective indices over the same period.

Since the peak year of 1999-2000, private completions of detached houses in NSW have fallen by 50% and completions of multi-unit dwellings by 40% in round numbers. By comparison, in the rest of Australia over the same period private completions of houses have risen by 10% and completions of other units by 40% again in round numbers.

Figure 2.2 shows completions of detached and multi-unit dwellings in Sydney since 1990-91. The details are given in Table A.3 in Annex A. Over the last 10 years, in round numbers, total dwelling completions have fallen from 32,000 to 15,000 per annum. Specifically:

● Completions of detached dwellings have fallen from 11,000 to 4,000 per annum.

● Completions of multi-unit dwellings have fallen from 20,000 to 11,000 per annum.

These are gross figures. Allowing for demolitions the net increases are lower than these figures.

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Figure 2.1 Completions of private houses and units in NSW and Australia (Index 1999-2000 = 100)

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Figure 2.2 Number of completions of private houses and units in Sydney

Figure 2.3 shows the total value of residential building activity in NSW and the rest of Australia since 1990-91 in constant 2008-09 dollars. This includes expenditure on alterations and additions. More details on building activity are given in Tables A.4 to A.6 in Annex A.

In the 1990s, NSW building activity rose with activity in the rest of Australia. In the last decade, building activity in NSW fell significantly whereas activity increased significantly in the rest of Australia. As a proportion of Australian expenditure, expenditure on residential development in NSW fell from about 35% in the mid-1990s to 21% in 2008-09.

Figure 2.4 draws on Table A.6 in Annex A to provide further detail of the trends in the major building components (new houses, other units, and alterations and additions) in value terms in NSW and the rest of Australia.

A significant feature is the expenditure on alterations and additions. This is relatively high in NSW and especially in Sydney where land is scarce. However there has been only a small decline in expenditure on alterations and additions compared with the fall in expenditure on new houses and units. This suggests that there is a demand for improved or larger houses but that this demand is met more easily by altering or adding to an existing property than by building a new one.

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Figure 2.3 The value of residential building from 1990-91 to 2007-08 ($m 2008-09 prices)

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Figure 2.4 Value of residential building components from 1990-91 to 2007-08 ($m 2008-09 prices)

2.3 Demand Drivers of Residential Building Activity in NSW and Australia

In the medium term the main demand drivers for housing are population and income. Household formation is also a driver of demand. However, household formation is driven in large part by growth in income as well as by demographic changes, so it is strongly correlated with income. In any case, data on household formation are not available post the 2006 census. Accordingly we focus here on the growth of population and income (measured by gross state product).

Gross state product (GSP) may be taken as a gross indicator of demand including both population and income at state level. GSP per capita is an indicator of income levels inclusive of earnings and income from capital.

Of course, conclusions about cause and effect must be drawn carefully because of the twoway relationships between GSP and housing and between population and housing. A low rate in growth of GSP may reflect in part a low level of housing activity. Likewise a low rate of growth of population may reflect low housing supply and consequently high house prices.

Table 2.1 shows recent population trends across Australia from 1996 to 2007. From 2001 to 2009 the estimated population of NSW grew at only about 1.0% per annum which was some two-thirds of the Australian average of 1.5% per annum. The estimated population of Sydney grew marginally slower than the population of the rest of NSW.

Figure 2.5 shows the growth of GSP per capita for in the states and territories from 1990 to 2008. This shows that the growth of GSP per capita in NSW has lagged the rest of Australia from about 2003. Nevertheless, GSP per capita in NSW has continued to grow. So it is hard to explain the large fall in residential construction by a fall in income. Tables A.7 and A.8 provide further data on state and territory GSP.

In summary, the relatively slow growth in population and in GSP per capita figures may explain part of the relative decline in residential building activity in NSW. However, it is unlikely that they would explain the 50% drop in annual new dwelling completions that has occurred in NSW.

Table 2.1 Population of states, territories and cities

1996

2001

2006

2009p

1996-2001

2001-09

no

No

No

No

% p.a.

% p.a.

NSW

6,204,728

6,575,217

6,816,087

7,099,714

1.2

1.0

Vic

4,560,155

4,804,726

5,126,540

5,427,681

1.15

1.5

Qld

3,338,690

3,628,946

4,090,908

4,406,823

1.7

2.5

SA

1,474,253

1,511,728

1,567,888

1,622,712

0.5

0.9

WA

1,765,256

1,901,159

2,059,381

2,236,901

1.5

2.0

Tas

474,443

471,795

489,951

502,627

-0.1

0.8

NT

181,843

197,768

210,627

224,848

1.7

1.6

ACT

308,251

319,317

334,119

351,182

0.7

1.2

Australia

18,307,619

19,410,656

20,695,501

21,874.920

1.2

1.5

       

2008

1996-2001

2001-08

Sydney

3,881,136

4,128,272

4,281,988

4,399,722

1.2

0.9

Melbourne

3,283,278

3,471,625

3,743,015

3,892,419

1.1

1.6

Brisbane

1,500,803

1,629,133

1,819,762

1,945,639

1.7

2.6

Adelaide

1,078,437

1,107,986

1,145,812

1,172,105

0.5

0.8

Perth

1,295,092

1,393,002

1,518,748

1,602,559

1.5

2.0

Hobart

195,718

197,282

205,481

202,287

0.2

0.4

Darwin

95,829

106,842

114,362

120,652

2.2

1.7

Canberra

307,917

318,939

333,839

345,257

0.7

1.2

Source: ABS, Australian Demographic Statistics, Cat. No. 3101.0

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Figure 2.5 GSP per capita for states and territories

2.4 House Prices

Figure 2.6 shows indices for real house prices in the five largest capital cities since 1990. Real house prices are house prices adjusted for inflation. More details on house prices are given in Tables A.8 and A.9 in Annex A.

Table 2.2 provides some key year figures for Australian cities along with a weighted average for Australian cities. Of course the weighted Australian average is heavily influenced by Sydney and Melbourne. On average real house prices in Australia doubled between 1995 and 2008. Actually real house prices in Sydney nearly doubled between 1995 and 2005. However they fell by about 10 per cent between 2005 and 2008.

Even with this drop in house prices, the median house price in Sydney rose from $287,000 in 2000 to $491,000 in 2008, which represented a real after-inflation increase of 33 per cent. House price data available for 2009 suggests that real house prices in Sydney rose by around 5 per cent or more in 2009.

Thus, although house prices rose by less in Sydney than in several other capital cities between 2000 and 2008, real house prices still rose considerably. These house price figures may explain why residential activity grew by more in other states than in with NSW. But with real house prices rising considerably in Sydney, there was evidently considerable demand for housing in Sydney. The substantial absolute fall in housing construction remains to be explained.

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Figure 2.6 Real house price indices for the largest Australian cities

Table 2.2 Index of real house prices (CPI-adjusted) Index 2000-100

Year

Sydney

Melbourne

Brisbane

Adelaide

Perth

Hobart

Darwin

Canberra

Australia

1995

75.4

74.3

95.1

90.8

89.2

99.7

97.3

94.5

82.2

2000

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

2005

148.4

144.6

158.9

174.8

171.5

180.4

134.9

178.5

155.4

2008

132.9

158.0

189.3

206.9

217.5

198.7

178.4

198.6

168.5

Sources: see Table A.7

2.5 Conclusions

Whether measured by completions of new dwellings or the dollar value of building activity, building activity has fallen significantly in NSW and in Sydney over the last 10 years. To cite some key examples:

● Since 1999-2000, completions of all new dwellings in NSW have almost halved.

● Between 2005/06 and 2007/08, fewer than 4000 new houses per annum were constructed in Sydney.

● Since the late 1990’s, the value of residential development in NSW has fallen from 36% of Australia output to just over 20%.

It has been suggested that these observations reflect the fact that 1999-2000 was a peak year for building in NSW due in part to the holding of the Olympics and the imminent advent of the GST on new housing. But this peak applied to units rather to detached houses (see Figure 2.2 and Annex A). Recent building figures may also have been affected by the credit squeeze associated with the Global Financial Crisis, which hit Sydney (the major financial centre in Australia) harder than other cities. Nevertheless, there has clearly been a large decline in building activity in NSW over the last 10 years relative to the rest of Australia.

Some of this slowdown in NSW reflects a relatively slow growth of income and population. GSP per capita has risen by slightly less than the Australian average since about 2003/04. Also, the population of NSW and Sydney has grown more slowly than in the rest of Australia since 2001.

The slow growth in population may also have reflected the high cost of housing, as house prices rose substantially in Sydney up to 2005. Thus the low level of housing may be cause as well as effect of low population growth. However, the high house prices up to 2005 should have induced a supply response.

Our judgment is that the slow growth in population and GSP per capita do not explain fully the substantial slow down in residential building activity. Households are still willing to pay high prices for housing in Sydney and to invest in alterations and additions. Supply side constraints on new housing activity are almost certainly responsible for a significant amount of the slow down in residential activity.

3.1 The Demand for Housing

The demand for housing in Sydney is primarily a function of:

● natural population growth,

● net migration to Australia,

● growth in household incomes,

● wages in Sydney compared with other Australian cities and towns,

● amenity in Sydney compared with other Australian cities and towns,

● relative prices, notably housing and transport costs.

The international demand to migrate to Australia is almost unlimited. Australia’s relative resilience to the Global Financial Crisis (GFC) has increased this demand. The number of migrants depends essentially on Australian government policy. However, given the high migrant population in Sydney, a high proportion of migrants have a preference for Sydney.

The demand for housing also increases with policies that encourage housing demand, such as the first home owner grant.

However, the demand for housing in Sydney falls in so far as housing and transport costs are higher than in other Australian cities. Thus as international firms and migrants enter Sydney and drive up house prices, other residents leave especially retirees who cash in the higher house prices.

If relative wages, amenity and transport and housing costs stay as at present, Sydney could be expected to maintain its current share of Australian population. As we saw in the Chapter 2, neither Sydney nor the rest of NSW maintained its share in the first decade of this century.

In the last 10 years Australian population growth averaged 1.5% per annum. However, the growth rate rose steadily from 1.2% in 2003-04 to 2.2% in 2008-09 (ABS Cat. 3101.0). Currently, one-third of the national population growth is natural increase and two-thirds is net migration.4

Table 3.1 shows the implications in 2030 of an annual 1.0%, 1.5% and 2.0% growth in population for Sydney. The implications for new housing depend on assumptions about changes in housing occupancy rates for the existing population, occupancy rates for new housing given that two-thirds of the new housing is likely to be units, and demolition rates.

For the purpose of this analysis, we allow:

● The average occupancy rate for the current population will fall by 5% from 2.60 to 2.50 persons per dwelling between 2007 and 2030.

● The average occupancy for new dwellings, of which at least two-thirds are likely to be units, will be 2.40 persons per dwelling.

● 2.0% of existing dwellings will be demolished between 2007 and 2030.

Table 3.1 Population and housing projections for Sydney in 2030

 

Population growth 2007 – 2030

 

1.0% pa.

1.5%

2.0%

Gross population

5,448,545

6,103,907

6,834,281

Increase in population (2007-30)

1,114,545

1,769,907

2,500,281

Increase in dwellings (new pop’n 2007-30)

464,394

737,461

1,041,784

Increase in dwellings (current pop’n 2007-30)

65,747

65,747

65,747

Demolitions (2007-30)

32,872

32,872

32,872

Total increase in dwellings (2007-30)

563,014

836,082

1,140,404

Annual increase in dwellings (2007-30)

24,479

36,351

49,583

Source: Consultant forecasts.

With these assumptions, net annual requirements would vary between 24,500 and 49,600 new dwellings per annum.

The Department of Planning (2008) forecast that between 2006 and 2016 households would grow between 23,400 and 25,000 per annum and net dwelling need including replacements between 24,400 and 26,000 dwellings per annum.5 These figures are at the low end of the forecasts given in Table 3.1.

Our forecast dwelling needs in Table 3.1 also far exceed the annual increase of 22,000 dwellings in Sydney between 2000/01 and 2007/08 (or the 16,000 dwellings between 2005/06 and 2007/08).

Of course, government could adopt lower population and housing targets. In line with some community thinking, the real income of Sydney households including environmental amenity may rise with a lower population and housing target. However, government can control population growth only by allowing house prices to increase or by some other mechanism (such as allowing journey to work times to increase) that would equilibrate household welfare at the margin in Sydney compared with other Australian cities. A low housing supply strategy would reduce housing affordability and impose a high cost on new households and renters and constrain economic growth. Current government policy is therefore to meet housing targets rather than allow housing affordability to decline.

How then can such an increase in households be accommodated in Sydney? This depends partly on where households want to live and partly on the financial and environmental costs of meeting these preferences.

The best indicator of where households want to live is house prices. If households are willing to pay $600,000 to live in area A and $300,000 to live in a similar house in area B, it may be inferred that they have a strong preference for living in area A.

Table 3.2 shows the median house prices in selected suburbs in the September quarter 2009. These include suburbs with asterisks that are in, or adjacent to, the case study areas in this report.

Table 3.2 Median house prices in selected suburbs in 2009

Local council

Suburb

Postcode

Median price 2009

Manly

Manly

2095

$1,531,000

Randwick

Randwick

2287

$1,367,000

Pittwater

Warriewood (*)

2102

$940,000

Ryde

Marsfield

2122

$837,000

Ryde

Eastwood

2122

$782,000

Leichardt

Leichardt

2040

$751,000

Ashfield

Ashfield

2131

$739,000

The Hills Shire

Castle Hill

2154

$687,000

The Hills Shire

Kellyville (*)

2155

$620,000

Blacktown

Kellyville Ridge (*)

2148

$525,000

Blacktown

Stanhope Gardens

2768

$496,000

Camden

Camden (*)

2570

$375,000

Blacktown

Blacktown

2148

$347,000

Campbelltown

Campbelltown (*)

2560

$283,000

(*) Denotes areas close to the case studies.

Source: Residex, Report NSW, Quarter Ending September 2009.

Anyone familiar with the geography of Sydney will recognize that house prices increase with proximity to the CBD and the coast and in the north of the city. Equivalently, house prices fall with distance from the CBD, distance from the coast and to the west and south.

These trends are evident close to the city, in the middle ring (from north to south from Marsfield, Eastwood, Leichhardt to Ashfield), and within the north-west (for example with the move from Kellyville over the Windsor Road to Kellyville Ridge) and within the southwest sectors (except for the relatively high prices in Camden).

Thus, house prices are also significantly higher in the north-west than in the south-west. As one developer put it, aspirational households move from the south-west to the north-west.

Traditionally households tended to move outwards, often within the same geographical sector, seeking newer and larger houses. However, as a senior development manager observed, with the greenfield sites now 60 km or more from the CBD, “Sydney has reached its natural boundary, especially for young kids”.

Locating new housing in these outer western greenfield areas is not only a transport, employment and recreational facilities issue. It is also environmental. At 60 km or more from the coast, the vegetation is sparser and the climate more extreme, often being 5o-10o hotter in summer and 5o-10o colder in winter than along the coast.

The fall in house prices to the west supports these views. However, a major developer contended to the consultant that households in Western Sydney are not concerned about distance from the CBD especially with growing employment and recreational facilities in centers such as Parramatta, Liverpool, Blacktown and Penrith.

Some planners and developers also consider that the distance disadvantage of greenfield sites can be overcome by improved transport infrastructure, especially by improved rail services. Undoubtedly provision of some basic transport infrastructure is necessary to enable development potential to be achieved. Thus transport is mentioned frequently in this report. However, transport infrastructure alone may not be sufficient to enable development. Whether this transport infrastructure is economically efficient or viable, and what kind of infrastructure are issues that are beyond the scope of this report.

3.2 Land and Housing Planning Supply Process

Most land and housing planning is done by local councils under the supervision of the state Department of Planning (DoP). This process is broadly as follows.

1. DoP identifies areas as likely long term urban residential land in a published document such as the Sydney Metropolitan Development Program, which was adopted by the government in December 2005.

2. DoP agrees that land can be “released”. A release means that the relevant planning authority should undertake master planning with the objective of producing a Local Environmental Plan (LEP), which will establish new zonings. The DoP monitors the timetable for rezoning, but there is no commitment to any particular new zoning. In the formally designated North-West and South-West Growth Centres, the Growth Centres Commission (GCC) established in 2006 undertook the master planning in cooperation with the relevant local council(s). The GCC is now incorporated within DoP. In other areas the local council is the relevant master planning authority working to DoP guidelines.

3. The relevant planning authority produces a Precinct Plan in the Growth Centres or a Local Environmental Plan in other areas. These plans effect changes in zoning from rural to urban uses of various kinds, as determined with the agreement of DoP. The planning process can take between 18 months and 6 years to complete. A draft Precinct Plan or LEP is put on exhibition for public comment before determination.

4. The relevant planning authority produces a Development Control Plan (DCP). The DCP provides more detail than a LEP, for example detailed road plans, building heights and set-backs and so on. The DCP may be done concurrently with the LEP or afterwards.

5. Council produces a Section 94 (S.94) plan that outlines the local infrastructure required for a land release area and its’ funding via developer levies. The S.94 plan may be produced concurrently with the LEP. Following recent changes, all S.94 plans requiring $20,000 or more per lot must be agreed by DoP. Developer contributions may also be secured by Voluntary Planning Agreements (VPAs) between the developer and council.

Within the Growth Centres developers also pay a state infrastructure contribution

(SIC). The SIC has been reduced over the last two years from $33,000 per lot to $17,000 per lot. It has been reduced further to $11,000 per lot temporarily until June 2011. These SICs are secured by VPAs between the developer and Minister.

Outside the Growth Centres the Minister may require a SIC or DoP may insert a clause into the LEP that makes subdivision conditional on certified satisfactory arrangements for provision of regional infrastructure.

1. Developers lodge Development Applications (DAs) for residential subdivisions, including roads and civil works. Conformity with an LEP does not guarantee development approval.

2. Developers must obtain a Construction Certificate (CC) to construct subdivision works. CC documentation will contain more detail, such as engineering or utilities design, than a DA for rezoning. The CC may be certified by a private certifier if consistent with the DA. However many developers submit CCs for subdivision to councils for certification as councils are the ultimate owners of any public infrastructure created.

3. The residential subdivision is then constructed and serviced with utilities, including water, sewer, recycled water, electricity and gas and telecommunications, under separate arrangements with Sydney Water and various other utility suppliers.

4. At the completion of subdivision works, the Council signs a Subdivision Certificate (the linen). The Council may sign this before works are completed if the developer provides adequate money bonds to cover the works’ completion. At this point S.94 contributions are paid.

The linen is prepared by a surveyor, and shows the actual and final property boundaries. It is lodged at the Land Titles Office, and the new lot is formally created with its own title. Lot sales can then be settled.

With Torrens Title subdivision (generally detached dwellings) the lot is created before construction of the dwelling. For strata title subdivision (generally attached or multi-unit dwellings), the new lots cannot be created until the dwellings are completed, as lot boundaries follow the building’s walls which therefore must be surveyed in situ.

1. When a building is complete, an Occupation Certificate is issued. Occupation Certificates can be issued in stages to facilitate subdivision construction.

2. Newly created roads and other public infrastructure are then handed to Council or relevant agency.

Major developments may be designated as of state or regional significance. If of state significance, they will be determined by the state Planning Assessment Commission or possibly by the Minister for Planning. The Minister has also prescribed that developments in certain categories and values will be determined by Joint Regional Planning Panels.

3.3 Supply-Side Issues

In order to assist the analysis supply-side issues it is useful to distinguish cases where urban housing with say 10 dwelling per ha or more is the most efficient use of the land, and those where it is not. Typical rural residential housing occurs on lots of 1 ha or more.

By most efficient land use, we mean the use that maximizes the net social benefit from the land taking into account the value of the end product and the private and public costs of achieving this product, including any externality impacts. The supply-side issues of main concern are those that prevent land being used in its most efficient use. Of course, land may be zoned for urban housing when this is not the most efficient use.

Numerous, inter-related, factors may constrain residential development. These include:

1. Urban housing is the most efficient use of the relevant land parcel, but the land is not zoned for housing. This can occur because insufficient land is identified for housing, identified land has not been released, or the rezoning process is slow. Any of these factors could result in an insufficient land supply for housing.

2. Urban housing may not be the most efficient use of the land where housing demand is low or development costs are high, or both. In these cases the englobo price of land will be higher in alternative uses (for example agriculture or rural residential use) than for housing (at least if the public costs of new housing are internalized via developer or other charges).

3. Landowners may be unwilling to sell land for housing development because they expect higher land prices in the future. This may occur because landowner expectations about markets exceed developer expectations, especially if land prices have been higher in the past or because they expect a favourable change in public policy.

4. Land may be zoned for urban housing but may be difficult to develop because of multiple (fractured) ownerships. This means that for various reasons the englobo price of land will be too high to allow viable development.

5. Government regulations as expressed through Precinct Plans or LEPs or as they are applied with DAs may impose inefficient restrictions on development.

a. In established areas, LEPs may restrict redevelopment or the application of capital to land so as to limit the amount of development.

b. In greenfield areas, a Precinct Plan or LEP may require developers to pursue densities that are not viable given market demand and cost structures. Also state agencies may impose unrealistic (and unviable) environmental constraints on development.

For completeness it should be noted that such restrictions may also reflect an appropriate control for environmental purposes.

1. Public provision of infrastructure such as water services or transport infrastructure may be inadequate and constrain development, for example lack of rail.

2. State and local developer contributions may exceed the marginal cost of supply of necessary services and make some development sites unfeasible. A variant on this is the cost imposed on developers by the Precinct Acceleration Protocol (PAP) operating in the Growth Centres.

3. The global financial crisis may have reduced the availability of credit to developers and raised its price, so reducing development.

4. Community risk. Development is often difficult because of local opposition to increased densities, “over-development”, and perceived reduced environmental amenity. This is closely related to restrictions under (5) above, but is of such potential importance that it warrants separate notice.

5. The process of development is slow, lengthy and uncertain, thus eroding developer confidence in development. Again this relates to (5) above.

The purpose of this report is to identify the relative importance of each of these factors.

Issues in greenfield areas

Planning distinguishes traditionally between greenfield areas and brown or established areas. Greenfield areas are typically agricultural or rural residential, but may include landowners living on one ha sites. In some cases, greenfield sites are other public purpose sites no longer required, for example for defence purposes.

However, in practice there are two main kinds of greenfield areas. One kind is adjacent to existing serviced suburban areas where there are usually 10 or more dwellings per ha. Typically the adjacent area contains numerous landowners living on one or two ha blocks. This is described as fractured ownership. This area often has a road network, some water supply, some parks and sporting facilities.

On the other hand, there are lands further from existing housing, usually more strongly agricultural, with few landowners and few urban services.

Government planning, based on major structure planning exercises such as the SW Growth

Centres Areas, tends to focus on incremental development adjacent to existing suburban development. This includes most of the greenfield areas in the Metropolitan Development Program shown in blue in Figure 3.1.

Applied Economics

Source: Department of Planning, 2009, Metropolitan Development Program.

Figure 3.1 Growth centres, greenfield areas, and major sites

This planning strategy aims to minimize new capital or infrastructure requirements and costs as well as urban sprawl. This presumes that although fragmentation of ownership may slow down development on the urban fringe, it does not prevent it. Some planners interviewed during this study noted that developers are often willing to take on areas of say 10 ha (with perhaps 5 or 6 landowners) and produce 150 serviced lots. This provides product and price diversity. They noted that there are many small developers in the market looking to make such developments.

It is also state government policy that land separated from existing urban areas or not connected in a meaningful way to existing infrastructure should not be developed out of sequence unless the developer(s) is willing to fund the whole cost of the required infrastructure connections (at no cost to government), not just their proportion of the anticipated cost of the infrastructure. The developer(s) can be reimbursed if and when the intermediate areas are developed. But the developer(s) must bear the risks relating to the amount and timing of reimbursement over which they have no control. The rules are laid out in the state government’s Precinct Acceleration Protocol.

While there are good reasons for these planning principles, they are contentious on two main grounds. First, many developers and some planners contend that, when land is in fractured ownership, precinct development will occur only slowly over 20 to 30 years. Getting even 5 or 6 landowners to sell their land for development at the same time at viable prices is generally difficult. Fragmentation is made worse by buy-in speculators.

Second, it is contended that larger development areas produce significantly better planning and lower unit costs of development. There are economies of scale, more safety in marketing, and entry statements. Large firms need big projects. Small developments are less viable.

4.1 Introduction

The Sydney Metropolitan Strategy (DoP, 2005)6 anticipated that 70% of new dwellings (mostly multi-unit) would be created in established areas and 30% (almost all detached houses) in greenfield areas. In this report we focus on greenfield areas, although two case studies are in established areas.

This chapter describes the planning background in north-west and south-west Sydney: the two main areas where greenfield growth is occurring in Sydney. The aim is to provide a geographical and planning perspective for the case studies in the next chapters. The chapter also provides some insights on the supply constraints identified in Chapter 3.

For our purposes, the north-west sector comprises the Local Governments Areas (LGAs) of the Hills Shire and Blacktown. The south-west sector includes Liverpool, Campbelltown and Camden LGAs. The major land release areas are in these LGAs. Figures 4.1 and 4.2 show released precincts in the South-West and North-West Growth Centres.

Other LGAs with land release areas are: Wollondilly, Penrith, Hawkesbury, Pittwater, Warringah and Wyong. Apart from Penrith and Wyong, the currently identified potential lots in these LGAs are relatively small.

In the early 2000’s, DoP started planning the areas that would become the official North-West and South-West Growth Centres. However, between 2002 and 2006, there were few land releases. Rezoned and serviced land was in scarce supply.7

The lack of land supply created a boom in englobo and serviced land prices. Developed land lot prices peaked in late 2003. In the early 2000’s serviced land prices rose from $200,000 to $300,000 per lot in Liverpool (not a high priced housing area). Englobo land prices continued to rise in 2004 even after serviced land lots had plateaued or even fallen. At their peak, englobo prices exceeded $2 million per ha in some areas.

Following publication of Sydney Metropolitan Strategy, in 2006, the government created the

North West (NW) and South West (SW) Growth Centres by gazettal of State Environmental Panning Policy (Sydney Region Growth Centres). The government also established the Growth Centres Commission (GCC) to release and rezone land in these Growth Centres.

The GCC identified 34 precincts and 181,000 lots in the two Growth Centres. Since early 2006, 13 precincts have been released with significant potential and 4 precincts have been rezoned though not necessarily yet serviced (see Table 4.1).

Further figures showing the fragmented nature of landholdings in large parts of the two Growth Centres are shown in Annex B.

In the SW Growth Centre, the Oran Park and Turner Road Precincts were rezoned quite quickly in December 2007, as a result of the GCC’s financial and planning input, and the significant planning input of Camden Council.

In the Liverpool LGA, the Edmondson Park Precinct LEP was gazetted in March 2005, before the Growth Centre’s creation. It was amended in 2008.

Table 4.1 Released and rezoned precincts in the Growth Centres

Released

Boundary
Review Process

Draft
Precinct
Plan

Rezoned
precincts

Lots under construction.

Lots produced

North-West

North Kellyville

04/12/06

Nov 2008

0

0

Marsden Park

09/06/08

Exhibited 01/02/10

0

0

Alex Avenue

04/12/06

Exhibited 6/02/09

0

0

Riverstone

04/12/06

Exhibited 6/02/09

0

0

Riverstone West

04/12/06

07/08/09

0

0

Colebee a

NA

May 05

100

97

Area 20

04/12/06

07/01/09

0

0

Schofields

17/10/09

Exhibited 01/02/10

0

0

Box Hill

17/10/09

Exhibited 01/02/10

0

0

Box Hill Industrial

17/10/09

Exhibited 01/02/10

0

0

Total NW

10

3

100

97

South-West

           

Austral

17/10/09

Exhibited
01/02/10

0

0

Leppington North

17/10/09

Exhibited 01/02/10

0

0

Edmondson Park a

NA

March 2005

0

0

Turner Road

04/12/06

Dec 2007

350

0

Oran Park

04/12/06

Dec 2007

300

0

Total SW

5

3

650

0

(a) Precinct rezoned prior to Growth Centre’s creation.

Sources: Various websites.

Applied Economics

Figure 4.1 North-West Growth Centre Released Precincts (source: Growth Centres website)

Applied Economics

Figure 4.2 South-West Growth Centre Released Precincts (source: Growth Centres website)

Also in the Liverpool LGA, the Leppington North and Austral Precincts were released in October 2009. They are currently zoned predominantly for rural purposes. It is anticipated that Precinct Plans will be gazetted for these precincts in about two and a half years. However, the DoP is reviewing Precinct boundaries, in accordance with the ‘Precinct Boundary Review Process.

In the NW Growth Centre, the Colebee Precinct, in the Blacktown LGA was rezoned in 2005, before the Growth Centre’s creation. This is a joint Medallist / Macquarie Bank development. In November 2008 the Precinct Plan for North Kellyville in the Hills Shire was gazetted.

The Riverstone West Precinct was rezoned in September 2009. Gazettal of Precinct Plans for Alex Avenue and Riverstone East are imminent. The draft Precinct Plan for Marsden Park (industrial with some residential) is on public exhibition. The Box Hill and Schofields areas are released and Precinct Planning is about to start. The target date for Precinct Plan gazettal is 18 months. However, the DoP is reviewing precinct boundaries, in accordance with the ‘Precinct Boundary Review Process’.

In 2004, the DoP estimated urban growth in the Growth Centres would generate the need for approximately $7.8 billion in infrastructure, and 75% of that cost should be funded by developers (Dept. of Infrastructure Planning and Natural Resources Fact Sheet 3 What Infrastructure Will be Provided, November 2004). This was translated into a Special Infrastructure Contribution (SIC) of $25,000 to $65,000 per lot, depending partly on lot size. An average of $33,000 per lot was struck for all precincts in the two Growth Centres.

Assuming an average 14.7 dwellings per developable ha, this is about $485,000 per ha. The SIC was intended to provide for new roads, heavy rail (including duplication of line to Vineyard and a new South West Rail link to Leppington), education land and buildings, police stations and justice, ambulance and fire buildings, bus subsidies, interchanges, acquisition of land as biodiversity offsets.

In October 2007, the SIC was reduced to $23,000 per lot. Buildings for education, police, fire and ambulance were taken out. In December 2008, the SIC was further reduced to $17,000 per lot and made only $11,000 per lot until June 2011.

Despite progress with precinct plans, development in the Growth Centres has been slow. The publicity associated with the Centres and the expectations of services including rail services encouraged expectations of up to $2 million per ha of englobo land when the realistic value was often half as much even in higher priced areas. Developers find it difficult to consolidate land on a viable basis where ownership is fractured. Several people interviewed during this study suggested that much of land in the released and/or rezoned precincts will not be developed within 20 years.

Provision of public infrastructure is a major issue, especially for water and transport. There is a shortage of wastewater treatment capacity in the region and unit costs are high when development is slow. Sydney Water cannot levy the cost of sewerage treatment plants (STPs) on developers but has to justify the expense to IPART to include in its general water charges. On the other hand, recycled water is intended to be developer funded, but the levy is apparently too low. Arguably, because recycled water saves costs for whole community, this should be paid for by Sydney Water customers generally. On the other hand, the cost of water connections should be levied on developers because this is a privately incurred service.

Many developers and planners also cited the on-off nature of rail services and the gold-plated estimates of the Roads and Traffic Authority as constraints on development. However, these issues have not been discussed with the relevant transport agencies.

4.2 The North-West Sector

Prospects in the Hills Shire

Apart from the Kellyville North Precinct (a case study below), the main potential development areas in the Hills Shire is Balmoral Road (Kellyville), which is located outside the NW Growth Centre (see Figure 4.3). Box Hill is another potential development area.

By early 2007, Balmoral Road was zoned and serviced. DoP and Council expect about 6000 dwellings in this release area. Of these, about 1,400 dwellings would be on lots of 700m2, 2200 would be medium density and the balance of 2400 dwelling would be high density including 100 in the ‘transit centre’ adjacent to the proposed station at the corner of Memorial Avenue and Old Windsor road.

To-date only 200 lots have been approved in Balmoral for development in 3 years and this rate of development appears unlikely to change. There are reportedly several reasons. The DCP is said to be difficult to implement. The Sydney Water trunk drainage route splits blocks in half. Land ownership is fractured. No major developer is involved in the area. The S.94 contribution is $53,000 per lot, but not indexed. Some landowners may hold out in the hope that the contribution will fall (and land prices rise).

Prospects in Blacktown

Blacktown is a diverse area with various market segments. The area in most demand, with the highest prices, is the north-eastern sector adjacent to the Hills Shire. Property prices tend to fall in the southern and western direction through East Blacktown and down to Mount Druitt in the south-western corner.

The main nominated land release areas in Blacktown are Alex Avenue, Riverstone and Colebee within the Growth Centre and Second Ponds Creek (one of the case studies below).

The St. Mary’s release area is largely developed. Other potential development areas are Schofields (based on an old airfields owned by the Department of Defence) and adjacent areas within the Growth Centre. A draft Plan has also been prepared for the Marsden Park Precinct, a large area to the north-west of these areas.

Rezoning of Riverstone East and Alex Avenue is imminent. A basic road infrastructure exists. Both areas can be serviced with water supply and wastewater STPs. However, elevated reservoirs and extensive trunk reticulation are required and delivery may take several years.

In interviews senior local planners advised the consultant that development of both areas is likely to be slow (or “very slow”). Land ownership in both areas is fragmented with about 400 landowners in Riverstone East and 100 landowners in Alex Avenue (see Figure B.1 in Annex B). The road layouts may go through multiple ownerships. Moreover, it is expected that the

Alex Avenue precinct is to be zoned and serviced for medium density, with lot size limits of 450m2. Some developers believe that is not the most viable level of density. When households locate over an hour from the Sydney CBD, they usually want more lot size.

Applied Economics

Figure 4.3 North-West development areas

Of course, there may be an englobo land price at which this high density could be viable. However, land values in Blacktown peaked at around $2.5m per ha. This equals about $220,000 per lot. These are unrealistic levels and expectations. Realistic amounts are about half this (see Chapter 7 on the Ponds case study). Landowners often have little comprehension about the costs of development.

The Colebee development is progressing slowly at under 50 lots per year. This development is to the south-west of Riverstone and hence a lower priced area. There is an access problem to Richmond Road, so that the development lacks an entrance address. A local observer also suggested that mixing small lots with a golf course was a poor marketing strategy.

The Schofields Precinct, Area 20, has now been released. The Australian Department of Defence tried recently to sell Schofields aerodrome to a developer, but apparently failed to achieve a satisfactory price and the land remains in Commonwealth ownership. The area is also liable to flooding.

Marsden Park is also mainly in consolidated ownership. It is largely flood free and has fair road access. These points favour development. However, there are reportedly two main obstacles to development. First, the area has poor water supply services. These would be expensive to provide especially as the developer(s) would have to pay the full costs of any capital investment in water supply to this not-yet-released land area under the Precinct Acceleration Protocol. Second, Marsden Park contains a fair amount of Cumberland Plain Woodland, which has been declared an endangered ecological species and is protected under the Commonwealth Environmental Protection and Biodiversity Conservation Act.

Generally, there is a view that development in Blacktown is held back by poor major transport infrastructure. The poor rail service on the single track railway and the lack of a road connection between the M7 and Richmond Road are often cited examples.

4.3 The South-West Sector

Figure 4.4 shows an overview of planning strategy for the South West sector inclusive of major infrastructure requirements.

Prospects in Liverpool

In the Liverpool LGA, the two largest development prospects are the Edmondson Park Precinct and Hoxton Park. Here we make some brief observations on Edmondson Park. This is a large area within the Growth Centre, south-west of Liverpool located between the M5 motorway (and main rail line) and the Camden Valley Way (see Figure 4.4).

Edmondson Park has been considered a development possibility since the early 1990’s, when it was included on the MDP’s predecessor, the urban Development Program. In a study in 2000 by Applied Economics for the Department of Defence (DoD) and Landcom (the two major landowners) found that the area could provide over 10,000 dwellings.

Applied Economics

Figure 4.4 South-West planning strategy

The Edmondson Park Precinct was rezoned in March 2005. This LEP allowed about 7800 lots including 6,000 in Liverpool LGA and 1,800 in Campbelltown. The yield fell significantly because of land use restrictions. Expansion of riparian area and related bushland caused a loss of 45 ha in a conservation zone. There is significant Cumberland Woodland Plain in the Precinct. Commonwealth legislation requires protection of 90% of endangered Cumberland

Woodland Plain. Following much negotiation between the State and the Commonwealth, a Conservation Agreement was reached which does not meet the 90% hurdle. The condition of sale now refers to compliance to this agreement. However, recently, the Commonwealth’s EPBC Scientific Committee elevated the status of Cumberland Woodland Plain to “critically endangered”. The DoP is in ongoing negotiations with the Commonwealth on the impact of this ruling. Attempts to compensate with significantly higher densities around a new town centre (Bardia) in the south of the Edmondson Precinct are not commercially attractive.

In practice, rezoning could not be effected until the Commonwealth transfers the required land to the State for regional open space (Clause 7.21 of Liverpool LEP 2008 and Clause 42 of Campbelltown LEP 2002). Apparently DoD has wanted to sell its large land holding in the Park for several years, but it cannot do so until the biodiversity issues are resolved. Also DoD has not completed site remediation.

Development of the Edmondson Park Precinct is also complicated because there are over 160 owners in the northern section. Many own two or more hectares. DoD and Landcom own most of the centre and south. Reportedly no major developers are interested in negotiating seriously with these small landowners. Many owners have been asking for over $1.0m per ha when the realistic value is about $0.4m per ha. Australand had some options but has left the area.

The fractured ownership creates other problems and requires a very carefully designed DCP. According to an experienced planner, the DCP requires cuts across many properties.

In Edmondson Park there are some 16 to 20 separate localities. The consultant was told that, before Liverpool Council will consider a DA, owners or developers must fund several studies, including water supply and catchment, indigenous heritage, biodiversity. The conditions that would warrant these expenditures apparently do not exist.

The Austral and Leppington North Precincts were released in October 2009, allowing planning to commence. Development of Precinct Plans is expected to take about 2.5 years. However, DoP has commenced a process to adjust the boundaries of these Precincts, which must be completed prior to rezoning. Water supply and wastewater treatment is a significant issue. STPs are planned at Kemps Creek, Lowes Creek and South Creek for a total cost of over $1.0 billion.

Again the land is highly fragmented. In the judgment of an experience developer, these areas are “unlikely to be developed for some time.” Many landowners own 1-2ha lots and value their land at over $1.0 million per ha. At 12 lots per ha, this would be a minimum of $80,000 per lot. Some second or third generation land owners are strongly attached to the area and seek higher prices.

Land values are propped up to some extent by the possible development of the south-west rail link that government has committed to provide by 2016. But it may be hard to justify a railway line to an area that is not developed and may not be developed for many years.

Prospects in Campbelltown

In Campbelltown, the main development possibilities appear to be the balance of the Edmondson Park Precinct, Menangle Park which has been in the MDP for decades, and Glenfield (one of our case studies).

Generally the demand for houses in Campbelltown, as exemplified by house prices, is not strong. When the consultant observed at a meeting with Campbelltown planners that “the world wants to come to Sydney, but we don’t have enough houses for everyone”, one planner responded: “Yes, but they don’t all want to come to Campbelltown”. It was also observed at the same meeting that “apartments in Campbelltown are ten years away”.

Prospects in Camden

Traditionally Camden Council employed a strong urban containment policy. In public consultation surveys (as required by the Department of Local Government) the key public messages were: keep the area as is; maintain rural charm; maintain country atmosphere. Accordingly, in its 1999 plan Council determined that the shire population might increase from 50,000 to only 70,000 people by 2025 - still a very low density level. When the GCC was proposed, Council initially opposed the concept.

If the SW Growth Centre reached its target yield, dwellings in Camden would increase nearly fivefold from 18,000 to 85,000 and the population from 53,000 to 256,000. Due to the initiatives of the GCC, assisted by Council, there is now 30 years of potential land supply available in the shire.

Several developments are occurring or have now been rezoned and are planned to occur. These include the Oran Park and Turner Road Precincts within the Growth Centre and release areas outside the Centre include Harrington Park, Spring Farm (a case study, see Chapter 9), Elderslie and two small release areas El Caballo Blanco and Camden Lakeside.

The largest development area is Oran Park. The Council and landowners started planning Oran Park in 1990-91. However, the precinct was released formally only in December 2006. Development was feasible because there were few landowners and water supply and sewerage for at least the first 3000 lots could be readily provided. Lack of road infrastructure was an issue. Rezoning occurred in very short time in December 2007. Thus, the planning process overall has been a lengthy one.8

Landcom data relating to Oran Park suggests that developers can expect to receive around $235,000 per serviced lot at this location, and that current landowner price expectations for raw land are around $40,000 per lot. While this provides a margin in the order of $195,000 per lot to accommodate development costs, this may barely fund all expenses including financing costs, developer returns and civil works, and public costs such as infrastructure contributions and utilities. This could imply that the englobo land price may have to fall to make the project viable.

Changes in market prices have impacted on the development. Up to 2004 the market was buoyant. Since then the market in western Sydney has been weak. From 2007, the GFC cut credit to developers. Financial pressures were exacerbated by rising government charges. The SIC of $33,000 was introduced. And developers were charged $7000 per lot for provision of recycled water facilities.

Generally, development seems likely to be slow in Camden. Community opposition to development appears to remain strong. A major developer described Camden as “the most difficult jurisdiction anywhere to get approval”. A planner described development of the Catherine Fields Growth Centre Precinct as “all but impossible” because of fragmented ownership. Another issue, raised by one developer, is lack of employment. Camden has an industrial area just south of Turner Road. However, whether another employment area is needed and justified is an open issue.

4.4 Conclusions

A general theme of the discussions with developers was that development of the North West and South West sectors would be slow.

This has been the historical experience as shown by data on developments to date compared with planned targets. Figures 4.5 and 4.6 show that developments in the greenfield sectors have fallen well short of targets.

Developers cite five main reasons for this slow rate of development. A major one is the difficulty of making major and expeditious developments in the face of fractured ownership. This problem is an important one because there is so much fragmented land ownership within the Growth Centres, which are the main focus of development planning. Examples include Austral, Leppington North, Riverstone and North Kellyville (one of our case studies).

Secondly, and related to the first issue, is the sequencing of releasing land. This applies within the Growth Centres and outside them. Within the Centres, the planned sequencing of precincts has allegedly constrained opportunities to consider efficient use of infrastructure across somewhat arbitrary precinct boundaries. A cited example is Edmondson Park, which is at the front of the sequence but not producing lots due to fragmented land and biodiversity issues. However utility planning continues to work on the assumption that this precinct must be developed before other local precincts. Developers claim that precincts outside the Growth Centres face greater obstacles for inclusion on the MDP because of the priority given to the Centres.

A third cited factor is the difficulties of dealing with state and local government agencies. State agencies drive the process in the Growth Centres. One very experienced developer with close knowledge of the public sector observed that “there has to be a change in the cultures of the state agencies. They don’t care if development occurs or not”.

A fourth significant factor is community risk. Public views about local environments do constrain development. This doubtless drives local government conservatism in dealing with development issues, as was evident in the Warriewood (Pittwater LGA) case study below.

Figure 4.5 Average annual dwelling increase 1994-2007

Applied Economics

Figure 4.6 Average annual dwelling increase 2005-2007

The fifth issue is transport. This is less clear. There are always roads. The issue is the quality of access, which is a relative rather than an absolute issue. Views vary about whether the Roads and Traffic Authority overestimates the necessary quality of the road network and whether rail services are necessary or not for development to occur.

It should be stressed that the above conclusions are essentially private sector (developer) views. The planning agencies would argue in general that the planning strategies in place are cost-effective and make economic sense from a wider community perspective and that any delays in process reflect the need to ensure that irreversible land use decisions are as correct as is possible.

The case studies that follow are designed to throw more light on these differences of view.

The North Kellyville precinct is an attractive well-treed, self-contained, area of about 700 ha located in the north-west of the Hills Shire (see Figure 4.3). It is bounded to the west and north by Small’s Creek and to the east by Cattai Creek. There is presently no access over Small’s Creek to the north-west (Rouse Hill). To the south the precinct is bounded by Samantha Riley Drive, which is the access road to the area.

There are currently about 200 properties in the precinct almost all under separate ownership. The properties are typically on 2 ha but sometimes larger. Many properties are owned and occupied by long-term residents. Most houses are old ones. There are few executive mansions in the precinct. Most properties have water supply and overhead power and the internal road network has some spare capacity.

A Precinct Plan, prepared by the GCC, was gazetted in December 2008. The Plan created the potential for some 4700 new homes. It also provides for a local centre, two neighbourhood centres, almost 19,000 m2 of retail and commercial spaces and 43ha of open space and recreational areas. Three major road upgrades are planned as well as a new northern bridge and cycle and walking paths.

Given the rezoning detail in it, the Precinct Plan is a virtual DCP. Figure 5.1 is the Indicative Layout Plan from the DCP and shows some of the SEPP controls. The Plan details roads mainly around properties rather than through them, parks and other open space areas, riparian setbacks, infrastructure, water management, etc. There is also a lot of bush fire prone land on which there are restrictions as to construction materials but where development is permitted.

The Plan establishes minimum lot sizes across the precinct varying from as low as 240m2 up to 4000m2 in the E4 zone. A council officer expressed the view that a medium density development based on 450 m2 per lot should be attractive to the market. However, other people interviewed considered that the market would prefer larger lots closer to 650 – 750 m2, which would imply a lower density of about 12 houses per ha. However, the Precinct Plan does not limit lot sizes.

The Hills Shire LGA is the consent authority for DAs. However, the Council cannot determine any amendments or rezonings. Only the DoP can amend the relevant State and Environmental Planning Policy.

The council cannot approve a DA if the developer cannot connect to water and sewerage. Also any development within 40m of a water course, potentially a large number, must be referred to the Department of Environment, Climate Change and Water (DECCW) for approval. This triggers integrated development requirement under S.91 of Environmental Planning and Assessment Act.

In the year since the Precinct Plan was gazetted, there have been no development applications for sub-divisions for housing. Moreover, there appears to have been little preparatory activity for such development. No major developer has purchased any land in the precinct.

Applied Economics

Figure 5.1 Planned North Kellyville Precinct

There are two main reasons for this. First, as of early 2010 there was no agreed S.94 plan. If council were to give consent to a DA before a S.94 plan is agreed, no money would be payable. Under the draft exhibited S.94 plan, the contribution would be $48,000 a lot. Recently Council adopted a contributions plan with a subdivision contribution rate of $45.086.39 for a standard subdivision or dual occupancy and $35,803.90 for a lot of less than 450 m2.

This contribution would include widening of Hezlett and Withers Roads to sub-arterial standards and a loop road around the proposed Local Centre. Council has budgeted $20 million for local road reconstruction and drainage. Local kerb and guttering is a developer expense. Another major expense is the proposed detention basins (drainage ponds) at the head of the creeks to prevent flooding downstream and to achieve DECC water quality targets. In addition, 40% of the cost of a bridge over Cuttai Creek is apportioned to North Kellyville. Parks and open spaces are a further major cost, although in some cases land may be provided in kind.

A second constraint is water and wastewater services. Sydney Water is committed to meet the rezoning. But currently few properties have sufficient mains supply water or access to sewerage.

Thus Sydney Water plans three packages of work for the proposed 4000 lots. First, the Authority plans to complete a waste water carrier up the western edge to connect to the STP in Rouse Hill by 2010. Local developers would then have to provide stubs of around 1 km to their properties. Also in the first stage, Sydney Water will provide mains water supply up Hezlett Road though centre of precinct.

Depending on the progress of development, in the second stage Sydney Water would construct a waste water carrier on eastern edge of the precinct in 2014. The total cost of over $40 million or over $10,000 per lot must be recouped from general revenue because Sydney Water can no longer levy developers. Sydney Water must prove to IPART that expenditures are “reasonable and efficient”. It must avoid developing “stranded assets”.

In the third stage, Sydney Water would provide a recycled water system. This reflects a commitment under by GCC although this is not economic at current water prices. For this future service, Sydney Water can levy developers $6000 per lot at the time of the DA. However, it is uneconomic to provide recycled services to fewer than 1000 dwellings and even with this number it is difficult to deliver the services at $6000 per lot.

Given that S.94 contributions and water supply issues will be resolved, the main question becomes: will current landowners be willing to accept prices for their properties consistent with developer requirements? Alternatively, at what rate will small groups of landholders agree to sell their land to developers over the next 20-30 years?

North Kellyville is a relatively high value, low risk, market. Depending on the exact location and the quality of the housing, new houses on 700 m2 could sell for over $700,000 (the average established house in Kellyville sells for $620,000 – see Table 3.2). Allowing for construction costs, finance, marketing and contingency/profit, this implies a price for serviced land in the order of $350,000.

Allowing for costs of approvals, site consolidation and development costs, utility connections, undergrounding of power, S.94 and SIC levies and finance, this in turn implies an englobo land value in the order of $130,000 per lot. With 12 lots per ha, this implies a price of about $1.55m per developable ha. Apparently this is about the price that developers would be willing to pay for a lot in North Kellyville.

In the absence of land development potential, few existing houses in North Kellyville would fetch prices in excess of $1.0 million. As noted, there are few executive mansions. Thus, although land values under existing uses are quite high, they do not constrain development.

The key issue, acknowledged by a council planner, is fragmented land ownership. Development relies on co-operation between landowners and many landowners reportedly have little interest in selling.

Obtaining approvals from DECCW represents an additional constraint, though not a fundamental one. DAs have to satisfy a myriad of conservation requirements. DECCW is widely perceived to be difficult to deal with.

Conclusions

North Kelllyville is an established, high value, house and garden area. Development of the precinct is economically viable, even allowing for the high costs of some public services notably water supply and the planned S.94 requirements.

However, development is likely to be difficult and slow due to the fragmented land ownership, community attachment to their current lifestyles and related high asking prices for their land.

The Ponds area of some 320 ha, formerly known as Second Ponds, is a natural extension to existing developed areas, and services in these areas, in Newberry and Kellyville Ridge in Blacktown (see Castlebrook in Figure 4.3). The Ponds precinct itself is a natural creek catchment bounded by two ridges. The creek is the focal point in the centre of the precinct.

The Ponds area has been identified as a suitable development area for a long time. There are many employment opportunities close to the area. The area is close to Quakers Hill and Schofields rail stations, though services on a single track are limited unless the line is duplicated to Vineyard. In the 1970s and 1980s, NSW Department of Housing purchased a large number of lots, thus consolidating a large part of the area under one owner (now Landcom).

However, rezoning took a long time. The Ponds was rezoned for urban housing in 2004 and rezoned again in February 2006 with an improved planning outcome. Because initial rezoning occurred before 2006, the Ponds precinct is not formally part of the NW Growth Centre.

The current zoning allows for about 3,200 lots. Eighty hectares are set aside for conservation and open space. A large stand of Cumberland Plain Woodland adjacent to Second Ponds Creek has been conserved. The conservation requirements and the attenuant bushfire buffers have resulted in a loss of 10% of the hypothetical developable area.

Several factors delayed rezoning. At the time of acquisition the State was acquiring land well ahead of its development potential being realised – this was on a cost basis and with a different view of the return on investment required from held land assets. Consequently, infrastructure was not available for many years. Landcom had other holdings which were zoned and serviced which it developed first.

However, Landcom made planning agreements with the state government and Blacktown Council whereby it would deliver all community service obligations in kind, including an upgrade for Scholfields Road. Landcom has provided substantial social infrastructure, roads and school sites in the precinct in advance of housing. Landcom has also provided approximately 50% of the landscaping with only 20% of housing lots established.

The Ponds today is laid out attractively around the main creek and various water features have been supplied. Landcom has spent about $40 million on site remediation, development of natural features, attractive common open spaces, a cycling track, and outdoor amenities. Landcom has also spent a large amount on creek preservation.

Although the S.73 charges that funded Sydney Water have been abolished, Sydney Water is committed to provide services to meet the housing take up rate. Given the capacity of existing STPs in north-west Sydney, mainly extensions of trunk carriers are required. However, the Riverstone STP needs augmentation to accommodate the development of the NW Sector.

Landcom plans to supply the planned lots over three stages. For the central component of 1300 lots, Landcom is working with Australand. The main product is serviced land. However, Australand has developed approximately 50 dwellings.

To obtain development approvals, Landcom has produced several DA’s and continues to do this on a stage by stage basis. This has been a slow process.

Landcom sought small lots to help sales to meet the marketing demographic, mainly young families. This was sought despite the need to have a builder construct four to six houses at a time, the complications that can occur with a zero lot line (house walls along boundaries) which means easements for access through neighbouring property, the need for architects, and the inability to sell products before they are completed.

However, Council was wary of the potential disamenity of small lots. The Council set a minimum 13m frontage requirement but allowed a 300m2 lot size.

In practice, the lots vary from 450m2 to 650m2, with most lots at the lower end of the range. The overall planned density average is 15 lots per developable ha. In some areas, the houses are close to each other on small lots.

Most lots sell for between $260,000 and $340,000. A range of houses is planned. Allowing $250,000 for construction, finance and landscaping, the value of the final land and house package is likely to range from a little over $500,000 to above $700,000 with an average average around $600,000.

Given the long term land ownership, there is little direct evidence of englobo land values. However, given the high costs of site development and public services, the implicit englobo land value is quite low.

Currently Landcom and its local partner (Australand) are selling about 450 lots per annum. The lots sell quickly and it seems that the asking price might be lower than could be achieved given the current scarcity of alternatives in the N-W sector. The temporary boost to the first home owners grant is doubtless another factor in the speed of sales

All up, 800 lots have been sold to date. Landcom anticipates that the whole site may be developed in an 8 year program from the time of the first lot sales.

Blacktown Council also regards the development as a success and claims some responsibility. There appear to be several reasons for this. First, Council or at least the planners on Council have supported the development. There has been continuity of personnel on both sides (Landcom and Council). This facilitated trust and cooperation and reduced surprises. Council planners have attempted to deal with DA’s expeditiously and with clear requirements. And because Council was responsible for authorizing construction certificates, and so had controls down the line, Council could treat DAs more quickly and more lightly.

Conclusions

Landcom views the Ponds as a “very successful project because of the scale”. A critical related reason, according to Council and Sydney Water officers, is the consolidated ownership of the site. The development also appears to have benefited from a generally constructive Council and good developer/Council relations at least in recent years.

In the absence of detailed financial figures, the commercial success of the development cannot be readily assessed. Undoubtedly the lots are in high demand and sales are occurring at a high rate. On the other hand, the costs of site development and provision of services were high. It is not clear what englobo price the development could have sustained in present day terms. However, much of the land was acquitted over 20 years ago.

The Glenfield precinct is an area of about 100 ha to the west of Glenfield railway station and the rail line. The area is bounded by Glenfield Road and Old Glenfield Road to the north, Campbelltown Road to the West, and Hurlstone Agricultural College on the southern side. See Figures 7.1 and 7.2.

Mirvac owns about 60% of the site. The balance of the site is owned by some 24 landowners

The area has been rezoned for residential housing with a total capacity of 1000 to 1200 lots. However, the allowed developable area is only some 65 ha. The rezoning required significant amounts of public open space. The foregone yield has a significant cost to the developer and landowners.

The higher capacity target would require about 20 lots per developable ha. The retail land lots vary from 450m2 to 600m2 and integrated housing lots from 220m2 to 450m2. Typically the built house living area is 140m2-220m2 for the retail land lots and 120m2-180m2 for the integrated housing lots. There are some very small stratum title garage top homes, aka Fonzi units, which offer 100m2 of second storey living area over shared garage space with an additional ground level courtyard of approx 50m2.

The Mirvac product is primarily land and house packages. To-date Mirvac has constructed the roads and service infrastructure to service approximately 420 lots (about 40% of the overall site). The company has invested considerable sums on creating two community title estates, known as Panorama and Vista at Panorama, including unique linear parks and two separate community recreation areas each containing a pool, tennis court, BBQ and CATV facilities and pristine landscaping. The result is high quality housing and a high quality social and natural environment.

For the development, the Council required the developer to provide a masterplan. Council requirements included roads and water services (water supply, sewerage, drainage) and multiple easements. The complexity of required staging for lead-in roads, truck stormwater pipes and detention basins, as well as required sewer and water reticulation lead-in lines, have been major site development constraints with many problems and delays encountered due to the large number of individual landowners, other than Mirvac, concerned with few willing to allow development of required trunk infrastructure assets on their land.

The S.94 levy is currently $42,000 per lot for detached dwellings amounting to a total payment of over $40 million for all DA’s. Over half of this ($23.7 million) is for open space purchases apparently at the high price of $1.7m per ha. Another $5.5M is for drainage functionality and $6.4M for roads works and intersections.

For recycled water supply, Mirvac pays Sydney water a levy of $3400 + CPI per lot for water and wastewater and recycling. This low price was well below what is required ($8000 per lot just for recycling according to Sydney Water). The levy for recycling increased to $7000 in 2008.

Applied Economics

Figure 7.1 Land ownership in Glenfield precinct

Applied Economics

Figure 7.2 Glenfield masterplan

Overall it appears that the development has had less than marginal viability. The price structure has to be low enough to sell lots or houses in a low priced part of the Sydney housing market (see Table 3.2). Reportedly Mirvac paid $1.1 million per ha which, in retrospect, is a high a price. The company faced high development and landscaping costs. But the market may not be ready for this product in this location. It was also observed that although the precinct is adjacent to the railway line, there is a long walk to Glenfield station from many parts of the precinct.

In principle the opportunity exists to deliver another 600-700 houses quickly in the area. However, this is not easily delivered because of fragmented ownership. There are apparently some strategic hold-outs. Development is also hampered by buy-in speculation that drove the asking price up to $1.7 million per ha.

The major developer (Mirvac) can submit DA’s for further development that bypass the properties that are not under their control. But apparently the provision of services would be relatively expensive and the resulting site layout would be sub-optimal compared with general development of the balance of the site.

The servicing difficulty is demonstrated in the stormwater strategy. The stormwater plan has been developed as a whole of site strategy which is an efficient and sustainable approach. However, the complexity is demonstrated with fragmented ownership. If one owner wants to develop their site (Site 1) they may be reliant on a neighbouring landowner (Site 2) for the provision of infrastructure such as retention basins. This is not a theoretical example but has occurred in practice.

The consultant understands that the courts can require land owners to provide easements providing that there are no damaging affectations and the outcomes are fair (or compensation is paid). But this process itself costs time and money.

Finally the developer has expressed some concern about the time that the council takes to determine linen plans. This is a common concern of developers. When developments are completed and significant funds are locked up in the development, each month of delay has a high finance (interest payment) cost to the developer.

Conclusions

The Glenfield development is well located, well planned and attractively designed.

However economic viability appears marginal because of the low product prices in this area, the high open space requirements, and the high price paid for englobo land.

Fragmented ownership has slowed down implementation and creates the risk of significantly sub-optimal planning and outcomes.

The East Leppington Precinct is in the SW Growth Centre (see Figures 4.2 and 4.4). The Precinct has an area of 464 ha. It is located on Camden Valley Way, near existing Liverpool suburbs and Edmondson Park to the north, and the El Caballo Blanco and Camden Lakeside release areas to the south. The Precinct sits across three LGAs (Campbelltown, Liverpool and Camden), but is mainly in Campbelltown.

Leppington Pastoral Properties (LPP) owns 333 ha in the Precinct, hence ownership is consolidated. Unlike Glenfield, the area remains rural, rather than rural residential.

Walker Corporation (the developer) and LPP started planning work for East Leppington in 2004. In September 2005 and March 2006, during the exhibition of draft Growth Centre documentation, formal submissions including technical reports, were lodged with DoP seeking East Leppington’s release simultaneously with the creation of the Growth Centre.

Release would permit commencement of precinct planning for 2700 dwellings. The developer notes that this would not in itself present any risk to the government regarding infrastructure provision. The submissions were not responded to, and when the Growth Centre was created in 2006, East Leppington Precinct was not released.

The government has adopted a ‘sequence’ for release of Growth Centre precincts. However, it is not known when East Leppington Precinct may be released. Until East Leppington is released undertaking planning work is risky, the developer has to outlay a significant sum with no certainty that the Precinct will be rezoned or the planning work adopted.

Any proposal to release an “unsequenced” precinct is considered under the provisions of the Precinct Acceleration Protocol (PAP). The PAP requires developer agreement to fund all infrastructure required to service the precinct and to link with existing infrastrcture, regardless of how many other precincts will also be served by that infrastructure. The developer can recoup a percentage of these expenses as these other precincts are developed. This passes all risk(s) to the developer, and it is unknown when other precincts will be released, rezoned and developed, and arrangements for reimbursing these costs are not clear.

This agreement must be made before the precinct is released, and therefore before precinct planning occurs. However, precinct planning is required to confirm infrastructure requirements, yields and feasibilities

In November 2006, Walker lodged a PAP Application with the Precinct Acceleration Control Group (PACG) comprising a representative of NSW Treasury, DoP’s Director General and the state Coordinator General. The application estimated the LPP land could support 2700 houses on lots of average size of 500m2. The developer estimates that house and land packages could be provided at $500,000 or less for the first home owners market. The top price for serviced land is estimated at $230,000. Presumably this would depend on the expenses associated with the required public infrastructure.

In May 2007 the Minister agreed to progress the application. However completion of the PAP process and release of the precinct for Precinct Planning required developer agreement to fund infrastructure, which included construction of 5 km of Camden Valley Way (CVW) at an unknown but significant cost.

The developer claims that the government did not explain why the Camden Valley Way upgrade was required to link to the East Leppington precinct. In late 2009 the RTA exhibited plans for the upgrade, indicating that the upgrade of the Camden Valley Way would be required whether East Leppington proceeds or not.

Also, all the government’s planning costs were to be covered by the developer. In contrast, the developer points out that the planning costs for the Leppington North and Austral Precincts, held in fragmented ownership, are met by the NSW community. However, our understanding is that government plans to recover 75% of these costs in due course by development levies.

Following extended negotiations, in mid-2009 the developer reached agreement with the PACG on reduced infrastructure requirements.

However, successful Court challenges to the DoP’s and Minister’s planning decisions resulted in the DoP reconsidering the PAP. The developer notes that the PAP has no basis in the Environmental Planning and Assessment Act, its regulations or SEPP Sydney Region Growth Centres.

Accordingly the DoP prepared a 65 page draft Voluntary Planning Agreement (VPA), which it advised must be executed prior to the precinct’s release for precinct planning. VPAs are binding legal agreements under the EP&A Act and interests are registered on title. They are usually executed upon rezoning or issuing of DA consent, when yields and infrastructure requirements are finalised.

The developer perceives that it is in a “Catch 22” situation. Planning work cannot commence until a binding agreement has been executed requiring the developer to fund infrastructure and the precinct is released. But release and subsequent precinct planning must be undertaken to determine yields and infrastructure requirements and hence viability.

Another issue is connection to an STP. Glenfield STP is about 7 km from East Leppington and will require rising main to reach along with a small amount of pumping. It is understood that this has spare capacity for a considerable number of lots. Liverpool STP can also be accessed by a 4 km main to Hoxton Park.

Sydney Water plans in the long term to develop a STP at Kemps Creek, which is about 9 km to the north-west of East Leppington, but in the same catchment. However, there are no current connections and Sydney Water does not plan to service East Leppington for a long time. According to Walker, there may be feasible servicing options such as sharing STP capacity at Glenfield or Liverpool with Edmondson Park while both precincts grow together, but Sydney Water will not consider these options until the government releases the East Leppington Precinct.

From the developer’s perspective there are several issues with these planning priorities, processes and financial requirements. It is claimed that precinct boundaries are artificial. Thus some precincts are released but other precincts have to follow the PAP, with associated additional infrastructure costs and uncertainties.

For example, the released Austral and Leppington North Precincts are to be serviced from a new Kemps Creek STP, However, there are 1600 landowners and “no one wants to develop there”. As there are unlikely to be houses in Austral or Leppington North for a long time, Kemps Creek STP will not be built and not service East Leppington. ‘Sequencing’ means East Leppington must wait for Austral and Leppington North.

In the meantime, according to the developer, there are alternative STP options, and sewer planning could be coordinated over the East Leppington and Edmondson Park precincts if both were planned as a whole, rather than as two separate precincts, with one blocked by the government’s adopted sequence of precinct release and the PAP.

Walker also notes that the PACG’s requirements for infrastructure to bring forward East Leppington in the ‘sequence’ and released focused on transport and Camden Valley Way. Neither the PACG’s requirements nor the draft VPA included sewer servicing in the list of required infrastructure. Accordingly the developer questions why sewer infrastructure has been raised as an issue for release.

The infrastructure costs in the Growth Centre’s Special Infrastructure Practice Note are estimates prepared by DoP in 2004 based on infrastructure concepts (Fact Sheet 3 What Infrastructure Will be Provided, November 2004). The infrastructure designs and specifications behind these estimates are not public, and the EP&A Act 1979 does not facilitate state government contributions to be challenged or made public.

By contrast, Council S.94 plans are transparent and can be challenged in the Land and Environment Court.

As a result, there is currently no planning or other development movement occurring in East Leppington. According to a senior planner in DoP, this reflects the non-viable nature of developing East Leppington at this stage. East Leppington is described as “stalled because the developer thinks it will not work (under current costings)”. The developer notes that this is a function of the uncertainty surrounding costs caused by the PAP process.

Evidently there has been a breakdown in communications between the private and public sectors in this case study. From the private sector perspective, the PACG and DoP are perceived to be inflexible and not listening. “DoP has drawn a line around the Growth Centres and its precincts and does not want to admit they won’t produce the lots targeted”. Needless to say this is not the view of the planners.

Conclusions

In the absence of detailed and transparent financial figures, the viability of developing the East Leppington Precinct cannot be determined. These figures cannot be determined until precinct and infrastructure planning is complete. However, this work cannot commence until the precinct is released, and the government will not release the precinct until the developer has made binding agreements to fund infrastructure.

Favouring development is the low englobo land cost as the land is consolidated and has not yet been converted to rural residential uses. But serviced lot prices would have to be low to meet the market in this area and servicing costs unknown.

Ideally the sequence of development would be determined by an explicit planning, economic and financial analysis for the East Leppington precinct, along with a risk analysis. The government could then determine whether the public sector should take on some of the funding of public infrastructure and the risks rather than pass the risks to the private sector which has no control over the risks.

Dealing with these issues appears to have been compromised by poor communications and lack of trust between the developer and public agencies.

From the developer’s perspective, government is imposing unnecessary planning hurdles, such as the release of precincts and processes outside of the EP&A Act, specifically the PAP and the Precinct Boundary Review Process. These hurdles create significant financial uncertainties and disincentives for the developer. While the government cited risks to itself associated with the release, figures and reasoning were not made available to the developer for analysis. This alleged lack of transparency raises a concern in the developer’s mind that not all development proposals are treated equally.

Walker Corporation pointed out that five years ago they were doing 17 development projects in NSW and 4 in other states. Today, they are doing one in NSW and many major projects in other states.

Spring Farm is a rural greenfields area of some 450 ha south-west of Camden town. The area is located between the Camden Valley way and the Hume Highway (see Figure 4.4). It is outside the South-West Growth Centre and under the planning control of Camden Council.

Three development companies (Cornish Group, Landcom and Mirvac) own or control 75% of the land area. Some 10 landowners own the balance of the land.

Spring Farm was listed on the state urban development program for some 15 years. Water supply is not expensive. The area drains to the existing West Camden STP and so wastewater can be readily collected and treated. However, transport infrastructure is sparse and considerable expenditure is seen as necessary, including some forward funding.

In 2001, the three development companies formed a consortium to do a local environmental study. It took five years to achieve a LEP. Council required three sets of public workshops and was described by one developer as “not an active facilitator”. However the Council considers that this is an inaccurate statement. A large number of state referral agencies also had to be consulted and satisfied with the plans.

Critically, the Department of Environment and Climate Change (DECC) required a substantial bush corridor to protect remnants of Cumberland Plain Woodland and (a subgroup) Elderslie Bankia scrub. DECC also required significant revegetation to protect threatened species. Procedural aspects were reportedly difficult and issues took a long time to resolve. This process held up determination of the LEP by two years. Moreover because each hectare allowed for housing had to be replaced by significant habitat elsewhere in the precinct, there was a significant loss of yield.

Under the Rivers and Foreshore Act, the Department of Water and Energy deems a creek to be a river - riparian area. This requires 40m from top of the bank on each side of the creek to be retained for vegetation or revegetation. One of the developers described this large amount of land as “glorified drainage swales”.

Because revegetation creates a fire hazard, the Rural Fire Service required all houses fronting these areas to have level 2 fire proof construction.

Both the LEP and the DCP were determined by Camden Council and gazetted in 2006 (see Figure 9.1). Any changes to the LEP, for example to reduce the riparian area, would require a new masterplan.

The LEP allows for nearly 4000 lots. Landcom has about 1350 lots, the Cornish Group 1200 lots, Mirvac 450 lots and about 10 other landowners have 1000 lots.

So far, DA’s have been approved for about 1000 lots. The first subdivision DA took 18 months. According to the developer, a prime reason for the delay was that the location of the collector road had to be revised. The responsibility for this revision is disputed.

Applied Economics

Figure 9.1 Spring Farm Master Plan

The Cornish Group also had to submit a DA for each subdivision or set of individual land holdings (up to about 20 holdings). The group observed that most DAs had to be amended several times.

Council officers responded to this statement by noting that Council does not initiate amendments, DAs can be amended only on applications by developers and any amendment must have reflected an agreement between the developer and Council.

The approved lot size varies from 390m2 to 600m2. Under the LEP, the mandated density averages 15 lots per ha. This is a State Government requirement, not a Council initiated requirement. This is a higher density than market forces would suggest so far from the centre of Sydney. The required density is driven by the idea that this will encourage public transport even though there is none and, apart from a few bus services, none is likely. It would be easier and more profitable to sell lots of 600m2 to700m2.

According to the Cornish Group, people in this area want detached single story houses. It is not possible to sell a house in this area without double garages. In the words of the developer: “we would get slaughtered”.

The first linen plan in October 2008 for creation of individual lots was registered in October 2008. To-date, the Cornish Group has developed and sold a little over 300 lots, which is viewed as quick uptake given the GFC. However, the pace of sales cannot be separated from the price. The Cornish Group is apparently selling some serviced lots at the low end price of $205,000 to repay debt. Mirvac has developed about 150 lots; and Landcom none.

Currently Council is approving DA’s for between 150 and 300 lots per annum. The Cornish Group has obtained DAs for another 200 lots. With 3000 lots to go, at 250 lots per annum there is 15 years of supply in the precinct. However, the Cornish Group anticipated that development may slow down with increased competition elsewhere in the shire.

A major issue that held up development was a difference of view about the need for grade separation at the intersection of the Camden Bypass and the Spring Farm collector road. The RTA considered that grade separation would be required at a cost in the order of $10 million when total Spring Farm development exceeded 1200 lots and that the developers would be responsible for whole cost. After some five years of discussion, it has now been resolved that grade separation will not be required. The interaction works may now cost in the order of $3 million. However, the funding remains unresolved. The Cornish Group considers the nexus is 20% and therefore the developer funding responsibility is 20%. .

Another traffic issue, though less contentious, is the proposal to extend the collector road between Camden Bypass and the M5. It is expected that the first 1.5km will be funded from S.94 contributions.

The first stage sewerage infrastructure for 4000 lots involves a gravity mains, pumping station and rising mains. Sydney Water estimates this will cost $13 m, but it is now required to fund and build the infrastructure. Sydney Water pays ahead and allocates to other developers.

S.94 payments are $56,000 per lot in cash or kind. The Cornish Group provides most in kind. Local green space is a State Government requirement but has to be funded locally from S.94 revenues. According to the developer, the S.94 payments have steadily increased and Council “is constantly shifting the goalposts” with revisions to the S.94 plans. The Council denies that this is a correct statement.

Bank guarantees and taxes are significant costs for the Cornish Group. The DoP proposed that the Cornish Group provide a guarantee of $20m for a DA over the whole site. This would have cost the group $240,000 p.a. Instead, each DA is now accompanied by a bank guarantee. A hundred lots require a bank guarantee of approximately $1.7 million.

Land tax is payable on the englobo value of the site, which is about $60m (at 1200 lots @ $50,000). Given land tax of 1.7% of land value, the tax (just to hold the land) is over $1.0 m per annum.

Finally the Cornish Group noted that it takes 4-8 weeks to register a linen plan with the state agency, Land and Property Information, after obtaining a linen plan from Council. If 100 lots are available, this equals $21 million in market value. Debt funding this is $1.7 million a year or $140,000 a month. In Queensland and Victoria, developers can pay a fee to expedite registration of the linen plan.

Conclusions

In this case study many alleged events are denied or disputed. It is beyond the scope of this report to try to determine the facts in each case. However the fact that there is a fair degree of contention is an important issue in its own right and one that needs to be acknowledged.

The Spring Farm development process has taken ten years and involved high unexpected costs. The Cornish Group has found this process highly demanding and is consequently questioning future major investments in land development.

The rezoning process alone took 5 years. There were major delays in this process. There were several state government referral agencies. Some requirements involved significant loss of yield.

The LEP imposed (mildly) restrictive conditions on lot size and house types. The Council view is that this is normal planning designed to facilitate an efficient determination process. However, this can deter development as markets should generally drive the nature of the product and densities unless there are strong disamenities that require a regulatory response.

There were many costs including high land taxes, holding costs and S.94 payments. Also proposed large expenditures on transport infrastructure have yet to be resolved. In principle these taxes and user charges can usually be absorbed by lower englobo land prices especially in rural areas where the opportunity cost of land is low. However this cannot happen when charges are levied unexpectedly during the development process and acquisitions have been formalised. Again Council denies that this reflects that there were such unexpected changes.

While development should now proceed, there remain uncertainties and unresolved issues, especially in relation to transport infrastructure. The developer acknowledges that DAs are determined much faster than previously but finds that they still take significant time to resolve.

On the other hand Council points out that its approval times are among the fastest in its group of like councils and among the fastest in Sydney. It also observes that delays in the DA process are usually at least equally associated with changes in plans by developers, omissions by consultants or the need to respond to community concerns.

Victoria Park is a 1.4ha site located between South Dowling Street and Joynton Avenue about 4km south of the Sydney CBD. It is adjacent to a major redevelopment housing area known as Green Square.

In previous use, the site was home to a commercial building occupied by Xerox. In early 2008, Meriton acquired the site with a view to constructing housing. At the time of acquisition, the City of Sydney Council and Central Sydney Planning Commission (CSPC) had approved a DCP with a floor space ratio (FSR) of 2.25: 1 for the site.

The DCP stated that if a public benefit was provided in accordance with a public benefits plan, the FSR could be increased to 2.5:1. This would imply an average of 5 to 6 storeys over the site. However, approval was not guaranteed. A masterplan would be required as part of a DA approval process.

In discussion with the consultant, Meriton described the site as an area in transition, with no major environmental issues and no significant impacts on other local residents.

In June, 2008 Meriton lodged a masterplan for a FSR of 2.5:1, which would result in 370 units, for Stage 1. This would need approval from the City of Sydney Council and the CSPC.

After a 28 day public notification period, the DA was examined by the City of Sydney’s Council’s Internal Design Review Panel. In turn this Panel briefed the CSPC. Meriton was not permitted to make representations to the Design Review Panel or at the briefing. However, Meriton did meet with CSPC officers.

Eleven months after lodging the DA, in May 2009, Meriton received a letter from the City of Sydney Council stating that changes would be needed for approval. According to Meriton, the main factors were the height of building (creating over-shadowing) and the presentation of the building envelop. There was no certainty at this stage that any resubmission would be successful.

Meriton amended the plans to a FSR of 2.35: 1 and to 345 units instead of 370 units. Council approved the amended plans in July 2009. The whole DA process took over a year even though a DA for 2.25:1 had already been approved.

Under the revised plans there would be 87 one bedroom units, 232 two-bedroom units, and 26 three-bedroom units. The aim would be to sell these units at around $400,000, $500,000 and $600,000 respectively.

Given construction costs averaging $250,000 per unit (including professional fees, project management and landscaping), total construction cost would be around $86 million.

S.94 contributions are $13,000 for a one-bedroom unit; $18,000 for two-bedroom unit; and $24,000 for a three bedroom unit. There would be small concessions in the order of 15% for affordable units. This would total nearly $6 million in S.94 revenues.

At the time of the consultation with the consultant, Meriton planned to lodge a DA for stage 2 buildings early in 2010.

In reviewing this process, Meriton noted that Brisbane Council had approved a DA for a 77 storey building in 4 months. By contrast the City of Sydney (and the CSPC) had taken over a year and they were not willing to approve a building of 10 storeys.

In the view of the developer, high buildings not only create more ground space, they can also be a more elegant built solution. The developer attributed the refusal to accept higher building to political opposition in Council rather than to professional criticism of the proposal.

It should be noted that in the time available for consultations at end 2009 the consultant was not able to talk to City of Sydney council officers about this development and related issues.

However a site inspection of the precinct indicated few open spaces, very little vegetation, few retail and other civic amenities and limited road access. It is possible that the $6 million in S.94 funds is intended to remedy some of these shortcomings of the development from a civic perspective.

Conclusions

Conclusions about this development and the process must bear the caveat that the consultation process was incomplete. But, prima facie, to take over a year to approve a DA of this nature does seem inefficient and likely to discourage development. There seems to have been no major issue holding up the decision making.

It must also be questioned whether the height limitations are the best solution for the site given the limited ground space. From a Sydney-wide perspective, one of the conclusions of this review of development is that Sydney will have to solve its housing problems to a large extent by applying more capital to scarce land and building up rather than by taking up more and more land some 60 km or more west of the CBD.

On the other hand, developer levies were of no significance to either the rate of progress or the outcome. These levies essentially set the price at which land is purchased. They were not so high as to prevent the redevelopment of land from commercial to residential uses.

The Warriewood valley (land release area) is located in Pittwater Council area between Warriewood Road in the north and Jacksons Road in the south (see Figure 11.1). The precinct is some 3 km from the coast and 5 km south of the Mona Vale. The total precinct area is about 110 ha.

The development of this area has a long history. The NSW government announced the land release in 1985 in what was then Warringah Council. In 1993, this area became part of the new Pittwater Council.

In 1995 the state government deferred the investigation process for the release on the grounds that “the impact on air quality in Western Sydney (presumably from extra motor vehicle traffic) had not been evaluated”. In 1997, the state government reinstated the land release back on the Urban Development Program.

Applied Economics

Figure 11.1 Location of the Warriewood Valley development precinct

The Warriewood Precinct has better access to services than Ingleside, another potential development area in Pittwater LGA. However, much of the land release area in Warriewood is low lying and flood prone. This necessitates a creek line corridor system for flood management across the site as well as open space links.

Rezoning of the Warriewood valley started in early 2000. Council designated 18 sectors across the valley and the rezoning is undertaken on a sector by sector basis. The rezoning of each sector is subject to a masterplan for the whole sector along with detailed environmental studies. The masterplan requires Council approval as part of the rezoning application which itself is required under the provisions of the Environmental Planning and Assessment Act.

The masterplan is based on a collaborative approach with agreement required from at least 70% of the landowners in the sector as outlined in the Warriewood Valley Urban Release Planning Framework 1997 and now the Pittwater 21 Development Control Plan. In practice the major developer in each sector has prime responsibility for the development of the sector masterplan.

Overall Council aimed to achieve 1886 dwellings from 110 gross ha over the Warriewood Valley. However each sector has to be seen in the context of the overall aim for the precinct. Thus planned densities varied from 10 to 25 per ha. Higher densities were planned for sectors 3, 8 and 11. At this point in time development of the Warriewood Valley has taken nearly 10 years and is about 60% complete.

Australand is a major developer in the Warriewood Precinct having developed and built over 500 dwellings in the precinct. To date Australand has been the only developer to deliver a full sector providing all services, open space and built form as a complete package. Australand spent over 3 years consolidating ownership of properties in four sectors and another 3 years doing the masterplans from 2003 to 2005. Although most of the product was standard 2storey housing, the developer “had to produce a myriad of reports” and “obtaining a consistent decision was difficult and time consuming”.9

Multiple land owners across the Warriewood valley are a major constraint. Therefore, rather than invite individual land owners to submit inconsistent, non-coordinated and non- comprehensive designs”, Council calculated the expected yields for each sector given environmental constraints. Council rezones a sector when it gets an acceptable overall plan for it including agreement from at least 70% of landowners (and according to Australand sometimes a higher proportion) to rezone a precinct. As Australand noted “obtaining agreement between landowners is not easy and the goal posts are consistently moving “.

The focus of this case study is sector 8. This is about 8 ha bounded by Forrest Road, Macphersons Road, Garden Road and a creek in the south boundary (see Figure 11.2). Development of this sector by Australand is now complete. Nearly all 140 dwellings are built and occupied.

Applied Economics

Figure 11.2 Approved site layout for Section 8 of Warriewood Valley Development

Another issue with sector 8 was the amount of open space (about one-third of the area) required by Council as identified under the Warriewood valley Section 94 Contributions Plan. This was principally for a large Central Park neighborhood area. The final outcome resulted in less density and less affordable product.

According to the Council, the developer was aware of the open space requirements and needed to account for them and the interface with the Central Park area in the masterplan. Council had purchased the park area with S.94 funds. Australand chose to locate part of the water management facilities for this sector (the main detention basin) in this open space area and this had to be negotiated with Council, who was the landowner and asset holder.

According to the developer, the open space requirements reduced the yield from 160 lots requested to 140 lots agreed. While the overall density of the sector is 17.5 lots per gross ha, allowing for open space the effective density is much closer to 25 dwellings per developable ha. The dwellings include apartments with basement car parking which were the first of its type of product in the new release area. This product is expensive to build compared to the standard two storey brick veneer homes that are typical of the area.

From the developer perspective, these constraints on building form were not justified and could have been avoided in producing a more standard and affordable product and still producing a high quality urban design outcome. On the other hand a Council officer observes that lots and dwellings close to the Central park were among the first to be purchased.

Australand reports that it had to do 10 DA’s for groups of 10-15 houses and describes the process as “lengthy, and subjective rather than based on solid urban design principles”. The average time for a DA was 12 months. There was “inordinate documentation” and the same points had to “be proved each time”. There were even controls over the colors and shades of external elements of buildings and what is appropriate color for the roof tiles.

In the view of the developer these were often officer-driven issues rather than based on a design response for the site. There are few residents close by and “very little community objections or input once the master plan was approved”.

The developer lodged an 88E application for a review of one DA (which Council rejected after 12 months) by a separate independent planner. Approval was obtained in 3 months, about a quarter of the time typically taken by Council.

Australand contended that Council monitoring is highly detailed. If DA’s are consistent with a master plan and the houses are 2 storeys, there should not be major delay in approving DA assuming all the relevant documentation has been provided. Often there was a lack of negotiation after a DA was lodged. While personal relations were amicable, Council officers were perceived to have “a lack of trust, respect and consistency (for the developer)”.

A Council planner has responded to these points by noting that the developer chose to stage the subdivision and creation of residential allotments for Sector 8 by applying for separate DAs for each super lot. The planner also pointed out that some of the planning involves land and assets dedicated to Council and that Council has a special governance responsibility for these assets.

Construction certificates were provided by private certifiers. These enable the developer to start building. These provide more detailed structural detail, electrical and plumbing systems etc. There were no problems at this stage.

When the buildings were completed, the developer had to lodge a linen plan to create individual lots for the homes. Attached homes are integrated products. According to the developer, the plan goes back to Council and through all the separate departments, engineering, building, roads etc. to ensure that the building is in accordance with the plans. This process typically takes 4 to 6 weeks.

The draft linen plan is then lodged with Land Titles Office. There is a pre-examination and some minor changes are possible. Then a final linen plan is submitted. Although this final plan has been pre-examined, this process may take another 4-6 weeks when it “should take one week”. From any developer’s point, this time is very critical as all their costs have been expensed and unnecessary delays are very costly and the client is keen to move into their new home.

Seen from the Council officers’ perspectives, the quality of the end product may be seen as justifying the process, including time and expenses incurred by developers. Development is effectively irreversible at least for many years. Council officers also point out that a stalled land release development that extends the completion data beyond the expected completion date is not in Council’s interest.

Overall the development of the Warriewood valley to date has been an environmental and market success but few developers have been able to achieve commercially viable returns. Sector 11 is high density housing sector but a successful outcome in terms of high quality layout, buildings and landscaping.

Sales of dwellings in Sector 8 are going well. Terrace houses are selling for $700,000 to $800,000. The buyers value new houses, low maintenance, and proximity (five minutes) to the beach and only 40 minutes from CBD in non-peak hours. The lack of graffiti is cited as evidence of a successful community.

Part of Australand’s problem, according to Council planners, was that it does not have product for 20 dwellings to ha which was a basic requirement for Sector 8. However as part of the master plan process Australand developed product to suit this requirement.

Council officers also pointed out that recommending a land release is a “major potential liability for Councils” especially in the current economic climate and with the lack of commitment by the state government to the provision of infrastructure.

Looking forward

Sector 9 is a development opportunity with about 200 lots adjacent to Sector 8 in which Australand and Stockland have existing land holdings. However there are about 12 other landowners.

According to Australand, there has been an “absolute stalemate” for 7 years. There have been “lots of meetings and numerous master plans”. These plans have not been exhibited because Council will not proceed unless at least 70% of the landowners agree to the master plan.

Some landowners are concerned their land may be zoned open space. They may then be required to sell at a market price below that which they could negotiate with a developer. If this sector is to proceed then Council needs to be seen as the leader and work with the landowners in achieving a high quality master plan which will not prejudice landowners that may have open space on their site, otherwise it will not happen.

A developer may seek to secure options on the land, in which the developer takes on all the risks and could be out of pocket substantially should the site not be rezoned. On the other hand, the landowners want developers to purchase land as if it were rezoned residential. Council planners described the landowners in this sector as having a “high consciousness of land values” and as “aggressive negotiators”.

Here, again, other factors come into play. The time taken to achieve a rezoning, even once local assent is achieved, is discouraging developers from investing in the process. Much of the sector is affected by bushfire prone land and hence approval is required from the Rural Fire Service. Approvals for works within the creekline corridors are required from the Department of Water and Energy and referral to the Department of Fisheries. Australand noted that the whole rezoning process is much quicker in Melbourne and that once land is rezoned DAs are determined much more quickly.

Developer levies are also high in this case. In 2005, S.94 levies were about $25,000 per lot. To-day Pittwater Council is requesting $62,000 per lot across Warriewood valley based on the estimated net present value from its financial modeling. According to Australand, water management (including lowering nutrient pollution loads for Narrabeen Lake) is a major issue. This levy is understood to be under state government review. In this regard, it may be noted that extra ratepayers in the council area may reduce the unit costs of general local services. In addition there is uncertainty (with Australand and Council officers expressing different views) about the application of a special SIC levy to contribute to the upgrading of Mona Vale Road.

While house prices in the Warriewood Valley precinct are such that these developer levies can be absorbed, landowners are often reluctant to accept these costs and to reduce the englobo land prices sufficiently to allow for these charges. This may impact on the ability of the developer to bring product to the market. And if levies are invariant with the kind of product, this may reduce the return, on and supply of, lower priced housing.

Another sector in the valley, Buffer Area 3, which is under the control of Meriton, has gone to Part 3A determination. The developer has requested a yield of 600 lots which is more than double the Council plan for 142 lots in the Pittwater LEP based on a study of environmental outcomes. Council is concerned because there is no environmental assessment and no clear statement about infrastructure requirements before the Major Project Declaration under the Part 3A process.

Conclusions

Development of the Warriewood valley appears to have been generally successful. Households have been willing to pay high prices for housing and the outcomes are environmentally attractive.

However, the processes have been time consuming and costly for developers. Certainly the LEP processes were lengthy. Moreover, they failed to create planning certainty. DA applications took months or even years to approve. This was due in part to the approvals required from state agencines under the DA process.

Reportedly conditions often changed during the process. Levies have increased substantially due to revised modeling of required developer contributions.

In the view of the developer, the problems lay with the Council processes of the DA rather than with community opposition. In the main case study (Sector 8) reported here, relationships between the developer and the Council officers were amicable but there were always very detailed procedures which were time consuming and not productive.

Looking forward to Sector 9, developers are reluctant to purchase land held in fractured ownership in advance of any assurance about development and given the very large amount of time to spend in planning. In any case, the landowners are placing such a high value on their land that development is financially difficult.

The Council perspective is different. Council planners note that Council “has to ensure governance between its various functions and services”. In their view, the successful environmental outcomes in Warriewood valley are due in large part to Council’s careful planning processes.

12.1 Introduction

As we saw in Chapter 2, there has been a low level of housing construction in NSW and Sydney since about 2000. Between 1999-2000 and 2008-09, the value of residential development activity in NSW fell from 33.7% of Australian activity down to 21.3%. Within Sydney, completions of detached and multi-unit dwellings fell from 32,358 dwellings in 1999-2000 to 14,795 dwellings in 2007-08.

While the slow growth of the state economy and population caused some of this slow down, the analysis in Chapter 2 indicates that supply side constraints on new housing activity are responsible for much of the slow down in residential activity. In Chapter 3, we identified ten possible supply side causes of the slow down.

In this chapter we draw on the findings of the seven case studies reported above and related discussion to determine the importance or otherwise of these potential causes. We also draw some policy conclusions.

It should be noted that the focus of this study has been on greenfield areas, with just two case studies in established areas. This limits the scope of the findings. One conclusion is that more examination of the potentials and constraints in established areas is desirable.

12.2 Potential and Actual Causes of Slow Development

1. Insufficient land is zoned for housing

Insufficient zoning of land for housing may occur because insufficient land is identified for housing, identified land has not been released, or rezoning is slow. Until 2006 it appears that land zoned for housing was in short supply for all three reasons.

Since 2006, much land has been identified and released. To-date only limited land has been rezoned and this has continued to be a constraint on residential development, albeit less than from 2000 to 2006. However, a considerable amount of land is likely to be rezoned in the next two to three years. Thus it appears lack of rezoned land will become less of a constraint.

2. Housing land is zoned in the wrong locations

However the rezoned land needs to be in the right locations. Land is zoned incorrectly when it is:

a) zoned for housing when its value for other uses is higher than its value for housing;

b) not released or zoned for housing when its value as housing land exceeds its value for other uses.

These general statements ignore third party or social effects. For a full evaluation, all public and private costs should be included in the evaluation. Nevertheless, the statements provide a guide to efficient allocation of land.

This review has not found any evidence that land zoned for housing development is not the highest and best use in these locations. However, the demand for housing 60 km or more inland from the CBD, and particularly in the south-west, is limited. Thus, there is limited pressure for development in some areas zoned for housing.

On the other hand, some precincts have not been released where housing may be an appropriate land use. These are typically precincts within or close to Growth Centres but with limited access to urban infrastructure. Given the high public costs of developing these areas, their development may be only marginally viable and the opportunities foregone may represent only a small increase in housing supply. However, as the East Leppington case study shows, arbitrary boundaries and the sequencing of precinct development have discouraged full economic examination of some of these options.

3. Landowners are unwilling to sell land for housing development

Landowners may be unwilling to sell because the land is more valuable in existing use, including rural residential, than as urban housing (point 2a above). They may also be unwilling to sell because:

a) their expectations about market values exceed developer expectations.

b) they are holding out for one or other reason: to extract monopoly rent or in the expectation of a change in government policy, for example increased planning concessions, that will increase land values.

c) they simply do not want to sell for the present at least.

Our case studies in North Kellyville, Glenfield, Spring Farm and Warriewood Valley suggest that landowner reluctance to sell is a major constraint on development. Landowners understand the final price of housing, but often have little understanding of the full costs of development and over-estimate the englobo land price.

In a separate interview with a developer who has left Sydney to develop housing in Northern NSW, the developer gave two main reasons: the high price of acquiring land and the difficulties imposed by local governments.

4. Fractured land ownership

As we saw in Chapter 4, most developers and some planners view fractured ownership as a major constraint on housing development. Fractured ownership increases the englobo price of land with some landowners holding out, increases uncertainty, increases unit costs with small scale development, makes funding of major infrastructure difficult, and makes overall precinct development difficult

The slow pace of development in rezoned areas with fractured ownership supports the view that fractured ownership is a major constraint on development. This was confirmed in several case studies, notably North Kellyville, Glenfield, Spring Farm and Warriewood Valley.

5. Government regulations may restrict development

In established areas, government may restrict development by restricting densities or, equivalently, by restricting the application of capital to land. According to the developers, this occurred in both Victoria Park and in Warriewood valley. In the former case, the planning authority also imposed height limits questioned by the developer.

In greenfield areas, government may restrict yield in various ways, including by open space, water quality or biodiversity requirements. This was a feature of the case studies in North Kellyville, The Ponds, Glenfield and Camden.

On the other hand, planning authorities in greenfield areas may require developers to provide high densities, possibly to achieve affordable housing, that are economically sub-optimal given market demand and cost structures. This occurred in Spring Farm and, to a minor extent, in Glenfield. When people live over an hour’s travel from Sydney CBD, they usually want lots larger than 450m2. Moreover, the cost per m2 of built space is higher for multiunit dwellings than for detached houses and developers do not get any return on their outlays on multiunit dwellings until the end product is produced.

6. Lack of infrastructure

There are mixed views on whether a lack of infrastructure, or lack of funding for infrastructure, is constraining development. This is especially true of transport.

As discussed in Chapter 4, the issue of transport is not clear. There are always roads. The issue is the quality of access, which is a relative rather than an absolute issue. Also, if transport infrastructure is not economically warranted, the relevant housing development may not be justified.

In our case studies, poor roads were cited as holding up development in Camden and East Leppington. Indecision over rail infrastructure was also cited as holding back development in both the south-west and north-west sectors.

In the absence of more detailed study, the role of transport in enabling land development cannot be determined. The market has an interest in claiming that transport infrastructure is needed because, wherever it is subsidized, it will increase local property values.

On the other hand, the Rouse Hill Infrastructure Consortium was cited as enabling development in the north-west, principally in supply of water services.

Because of its pricing power, albeit constrained by IPART, Sydney Water is generally able to commit to providing water supply and wastewater services. But this can be a slow process and hold up the pace of development.

Overall, the government’s reluctance to borrow to finance infrastructure has probably been a constraint on housing development. This has led to the high private funding requirements (and high private risks) under the PAP protocol that almost certainly slow down development, as the East Leppington case study suggests.

7. State and local developer charges are excessive

Generally developers did not cite local council developer charges as a constraint on development providing that (a) the charges are known in advance and not likely to increase and (b) there is a nexus between the developer charges and services provided. The second condition is more likely to be achieved when the developer provides the works in kind and this is often a developer’s preferred contribution method as in The Ponds and Spring Farm.

If the developer charge is known in advance, it reduces the englobo land price by an equivalent amount. Unless the land value for an existing use is similar to the land value for urban housing, a change in development charges has little impact on development.

However large changes in development charges, as have allegedly occurred in Pittwater and Camden, undermine the confidence and trust of developers.

A lack of nexus also undermines confidence. This is a perceived problem with the SIC levy. This is perceived as a general levy to provide state infrastructure, mainly roads, which may not be supplied in the local area.

8. The global financial crisis has reduced the availability of credit to developers

Several developers mentioned that this was an issue in the last two years. However, the lack of credit does not apply to development before 2007-08 and is no longer seen as a major issue. Current Victorian construction rates suggest it is not a constraint.

9. Community risk.

Development is often viewed as constrained by local resident opposition to increased densities, “over-development”, and perceived reduced environmental amenity. This is closely related to restrictions that local councils may impose on the development (see point 5 above).

Community opposition to more development is generally a greater constraint on development in established areas than in newly developing ones. In our view it was most likely an issue in Pittwater although the developer put little emphasis on this.

In the recent Bradfield by-election (at end November, 2009) in northern Sydney the prospective winner was asked whether the then recent change in leadership of the Liberal Party would result in a leakage of green votes to other parties. He responded apparently accurately that “the key issue in Bradfield is over-development”.

In our greenfield case studies, several people noted strong public opposition to development in Camden. Some planners also forecast that development would be slow in North Kellyville because some residents would prefer their current low level of residential density.

While preparing this report, Applied Economics spoke separately to three other developers. Each stressed the high importance that local councils attach to local opinions, predominantly in opposition to development, and the constraints that this placed on approving development applications.

It may be asked whether and why community opposition to development is greater in Sydney than in other cities and if so why? We do not have any inter-city comparisons of opposition to increased densities. However, certain conditions suggest that the issue may be strongest in Sydney. These are the high house prices (the high proportion of household wealth held in housing in Sydney) and the importance of environmental factors in creating and sustaining house prices. Also the amount of congestion on the major transport modes is a factor because any increase in housing density increases this local congestion. These factors are to some extent a function of the natural topography of Sydney.

10. The process of development is slow, lengthy and uncertain

It should be possible to complete a LEP in 2 years or perhaps a little more in a complex case. However, the LEPs for Spring Farm, Glenfield, Warriewood Valley, Kellyville North and The Ponds took well over 2 years. In each case the process was slow and the outcome uncertain. No LEP has started for East Leppington. Approval of the DA for Victoria Park took over a year.

However, the LEPs did not provide certainty or security. There was a general lack of confidence that regulations would be constant and not subject to change.

In a separate interview with another developer, the consultant was told that the developer could rarely obtain development approval in Sydney within two years of purchasing a site.

Trust and certainty are key requirements for sustained development. Our interviews with developers for this consultancy and others indicate that the development industry has a low level of trust in local government planning in Sydney. This was evident in varying degrees in the case studies for East Leppington, Glenfield, Spring Farm, Pittwater and Victoria Park. The Ponds was an exception.

Poor communication and commitment also appear to apply to state agencies. A very senior public sector developer said that the “state government agencies are just as bad. There is massive fragmentation of responsibilities. Many agencies have a narrow focus”. Two other developers cited a lack of willingness of state agencies to be open to communications and discussions.

The planning system is full of vague ill-defined statements. As one developer observed, planners want to retain maximum power at every stage of the process. When there is discretion, decisions are arbitrary and the identity of decision maker matters.

Conclusions

The slow rate of development has many causes. In the words of a very experienced developer: “there is no single cause. If there was only one issue, the problem would be solved by now”.

From our analysis, the following are the main reasons for the slow rate of development.

● Community preferences for low residential densities, their defence of their environment and opposition to development.

● The defence of the status quo by many local councils, which produces restrictive plans and slow planning processes.

● A lack of commitment of some state agencies to development.

● A lack of public infrastructure, principally of transport but in some cases for water.

● A reluctance of landowners to sell land to developers at prices that enable viable development. Thus englobo land values are unrealistically high.

● Related to the last point, landowners do not pay for the full opportunity cost for occupying rezoned land. While rates are payable on the additional rezoned value of the land, they are levied at the lower rural rate (where this exists) where the rural use is the current main use of the land instead of at the higher general rate. Moreover landowners can postpone paying rates on the uplift of value due to rezoning until the land is actually developed and any rate payments more than 5 years old are written off.

● Fractured land ownership.

● Several of these factors contribute to high transaction costs for developers, increase the cost of development and make Sydney a relatively unattractive place for development capital compared with other major cities despite the high market price of housing.

There is a lack of land supply for housing in areas where most people want to live. This is a natural constraint. On the other hand, there is, or will be shortly, a fair supply of zoned land for housing in areas where house prices are low and where there is less demand for housing.

State and developer charges are sometimes excessive in relation to services provided. However, they tend to reduce englobo land values and generally do not constrain development.

12.3 Policies

In this final section we draw out some policy conclusions from the analysis. However, a detailed evaluation of policies is outside the scope of this report. By way of introduction to policies, three main points may be made.

First, the NSW government has a policy choice. The government could decide on a low population policy. It would do so primarily with the objective of preserving the environment of existing communities. This would imply a low housing completions policy.

However, this would not be costless; it would come at a cost of escalating house prices. The state government can control the net increase in the Sydney population by allowing house prices to increase. It cannot control the number of people who want to come to Sydney and therefore the demand for housing in Sydney.

Second, the state government cannot solve the housing problem by rezoning more and more land for housing over 60 km from the city centre and the coast alone. Such housing will suit some households and has its place in any development strategy. But this will not accommodate the preferences and demands of most households living in Sydney or wanting to live in Sydney.

Thirdly, therefore, to accommodate a significant increase in the population of Sydney, means will have to be found mainly in established housing areas. If Sydney is to accommodate a population increasing at a rate of say 1.5% per annum, an analysis of development opportunities and recent history suggest that over 70% will need to be accommodated in established areas. This implies that the populations in established areas will have to increase by over 20% in 20 years or equivalently that population densities will increase by over 20% in 20 years. This is a significant challenge for many areas especially as household size falls.

What policy issues follow from the case studies and this analysis?

● Fundamentally, it will be necessary to apply more capital to land. This will involve building higher and building more cleverly in established areas.

● Market forces should guide planning and development but not dominate it. Councils should use planning controls to meet specific environmental objectives but be cautious about using them to meet local social objectives.

● The NSW Government will need to explain the population and housing choices, the implications and the preferred outcomes. There needs to be improved communications between the: the state and local government, developers and the general public.

● Councils need to commit to housing targets and develop policies that developers can count on. Confidence and consistency are critical for developers.

● State agencies need to be coordinated so that there is a consistent “whole of government view”.

● Where a rezoning cannot be achieved, developers should be able to obtain an independent review.

● Transport solutions will be essential in established and green field areas. Local opposition to development is often based on the concern that development will make existing traffic congestion worse. This is likely to mean developing around rail stations and pricing of roads, among other solutions.

● Precinct boundaries and Precinct Acceleration protocol arrangements may need to be re-examined.

● Rating concessions for land that has been rezoned should be reviewed so that landowners pay rates that more properly reflect the opportunity cost of the land that they are occupying.

● Given the problems with developing land in fractured land ownership, Government may have to consider compulsory acquisition of some sites and master planning the area, as apparently happens in the United Kingdom.

● Within established areas, the Government may have to be prepared to allow strata plans to be demolished with a 75% or 80% agreement of the owners..

Clearly, the last two policy options raise significant issues for the rights of property owners and would be applicable only where the public interest was demonstrably strong.

Given the high demand for housing in Sydney, the land constraints in the areas where households want to locate, and local opposition to increased densities, solutions will require creativity and good communications.

Table A.1 Completions of private houses and units in NSW and Australia (Numbers)

Year

NSW

Australia

 

Private houses

Private units

Private houses

Private units

1990-91

24870

11246

94009

28911

1991-92

24303

10230

96189

26799

1992-93

26519

12548

112285

32922

1993-94

27823

14799

118613

39850

1994-95

28745

16455

118982

43433

1995-96

25658

17738

92451

36633

1996-97

23233

14835

82147

31231

1997-98

25168

14659

92991

34228

1998-99

26070

18831

96860

39799

1999-200

28236

20398

109522

41016

2000-01

22947

17526

91075

39059

2001-02

21430

12901

94666

33548

2002-03

23594

19032

107995

41519

2003-04

22149

20203

106875

46334

2004-05

20477

22689

104510

52586

2005-06

18023

17351

102153

48864

2006-07

15122

14182

101019

43407

2007-08

13359

12365

98723

40996

2008-09

14256

11696

100330

40796

Source: ABS, Building Activity. Australia, Cat. No. 8752.0.

Table A.2 Completions of private dwellings in NSW and Australia (Index 1999-2000 = 100)

Year

NSW

Australia

 

Private houses

Private units

Private houses

Private units

1990-91

88.1

55.1

85.8

70.5

1991-92

86.1

50.2

87.8

65.3

1992-93

93.9

61.5

102.5

80.3

1993-94

98.5

72.1

108.3

97.2

1994-95

101.8

80.7

108.6

105.9

1995-96

90.9

87.0

84.4

89.3

1996-97

82.3

72.7

75.0

76.1

1997-98

89.1

71.9

84.9

83.5

1998-99

92.3

92.3

88.4

97.0

1999-2000

100.0

100.0

100.0

100.0

2000-01

81.3

85.9

83.2

95.2

2001-02

75.9

63.2

86.4

81.8

2002-03

83.6

93.3

98.6

101.2

2003-04

78.4

99.0

97.6

113.0

2004-05

72.5

111.2

95.4

128.2

2005-06

63.8

85.1

93.3

119.1

2006-07

53.6

69.5

92.2

105.8

2007-08

47.3

60.6

90.1

100,0

2008-09

50.5

57.3

91.6

99.5

Source: Estimated from Table 1.

Table A.3 Completions in the Sydney metropolitan area

 

Detached
dwellings

Multi-unit
dwellings

Total

Multi-Unit
Dwellings (%)

1990-91

9,336

6,972

16,308

43%

1991-92

11,580

8,386

19,966

42%

1992-93

12,301

11,222

23,523

48%

1993-94

12,606

11,179

23,785

47%

1994-95

13,389

14,505

27,894

52%

1994-95

10,904

14,455

25,359

57%

1996-97

9,820

13,496

24,641

55%

1997-98

9,965

14,256

25,618

56%

1998-99

12,673

17,501

30,174

58%

1999-2000

11,325

21,033

32,358

65%

2000-01

10,995

19,517

30,512

64%

2001-02

11,639

17,458

29,097

60%

2002-03

8,748

15,551

24,299

64%

2003-04

7,178

16,749

23,842

70%

2004-05

4,585

15,409

20,333

77%

2005-06

3,612

14,446

18,590

80%

2006-07

3,709

10,556

15,479

74%

2007-08

3,779

11,040

14,795

75%

Source: Department of Planning based on Sydney Water connections.

Table A.4 Total value of residential building $m (2008-09 prices)

Year

NSW

Rest of Australia

1990-91

7,789

12595

1991-92

7,677

14343

1992-93

8,760

16331

1993-94

9,249

15942

1994-95

10,207

14184

1995-96

9,284

15,475

1996-97

8,974

19,523

1997-98

10,444

18,382

1998-99

11,814

15,606

1999-200

12,850

15,833

2000-01

8,693

18,673

2001-02

10,424

20,707

2002-03

12,504

20,814

2003-04

13,022

16,405

2004-05

12,174

16,444

2005-06

10,428

19,725

2006-07

9,622

20,875

2007-08

9,219

25,297

2008-09

8,706

19,272

Source: ABS, Construction Work Done Australia, Cat. No. 8755.0

Table A.5 Value of residential development in NSW as % of Australia

Year

New houses

Other new

Total new

Alterations & additions

Total

1990-91

27.0

40.6

31.0

45.9

33.3

1991-92

26.9

41.8

30.9

43.1

32.7

1992-93

25.1

44.1

30.3

42.9

31.9

1993-94

24.8

39.3

29.2

42.6

30.9

1994-95

25.1

44.8

31.2

43.8

32.9

1995-96

27.8

50.6

35.0

42.7

36.1

1996-97

27.6

49.7

34.5

39.9

35.3

1997-98

26.2

49.6

33.4

41.6

34.6

1998-99

26.9

52.8

35.2

41.8

36.1

1999-200

26.0

48.3

32.8

38.8

33.7

2000-01

24.8

41.7

30.6

34.2

31.1

2001-02

23.3

43.3

29.8

34.4

30.4

2002-03

23.0

44.7

30.4

36.8

31.3

2003-04

22.4

41.7

29.3

36.9

30.4

2004-05

21.4

37.4

27.1

36.4

28.5

2005-06

19.2

33.5

24.0

35.2

25.7

2006-07

17.6

32.1

22.1

31.8

23.6

2007-08

16.7

30.8

20.9

30.8

22.4

2008-09

16.4

26.9

19.7

30.4

21.3

Source: ABS, Construction Work Done Australia, Cat. No. 8755.0.

Table A.6 Value of residential building activity (Index 1990-2000 = 100)

   

NSW

   

Australia exc. NSW

 

Year

New

Other

Alterations

Total

New

Other

Alterations

Total

houses

New

& additions

Houses

New

& additions

1990-91

67.7

41.8

75.3

60.6

55.1

15.7

50.8

46.9

1991-92

69.9

40.2

67.5

59.7

51.1

15.8

49.7

44.3

1992-93

74.9

56.2

71.2

68.2

59.7

17.9

53.3

50.7

1993-94

80.2

57.9

74.8

72.0

65.0

24.7

59.2

56.4

1994-95

80.1

76.0

83.8

79.4

64.8

25.8

62.7

57.1

1995-96

70.7

70.9

78.8

72.3

52.3

37.7

60.9

51.1

1996-97

69.3

68.6

73.4

69.8

49.0

51.0

67.2

52.6

1997-98

79.2

80.0

89.1

81.3

68.7

61.2

78.5

69.0

1998-99

86.2

98.2

95.0

91.9

80.8

73.8

84.3

80.1

1999-2000

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

2000-01

66.3

69.6

67.3

67.7

76.6

97.8

82.3

81.7

2001-02

78.3

85.3

80.7

81.1

92.6

112.8

96.1

97.1

2002-03

88.2

110.9

96.0

97.3

105.6

128.9

93.9

108.0

2003-04

89.6

114.2

108.7

101.3

105.8

139.0

107.1

112.4

2004-05

84.4

103.2

107.3

94.7

105.2

135.0

103.9

110.6

2005-06

74.4

81.9

100.2

81.2

102.9

117.1

96.8

104.4

2006-07

71.6

71.2

93.6

74.9

107.1

93.6

103.7

103.7

2007-08

68.8

66.7

92.6

71.7

107.5

100.0

112.8

106.8

2008-09

65.8

61.7

88.0

67.7

119.9

128.5

111.1

120.0

Source: Calculations based on ABS Cat. 8755.0.

Table A.7 GSP per capita (% change per annum)

Year

NSW

Vic.

Qld

SA

WA

Tas

NT

ACT

Aust.

1990

-0.7

-1.9

0.4

-1.6

1.5

-1.4

1.2

3.4

-0.6

1991

-0.1

-1.5

2.7

-2.1

3.4

0.4

-2.1

-0.1

0.0

1992

2.6

3.9

6.3

2.5

3.7

3.0

-0.2

3.0

3.7

1993

3.3

3.8

4.7

3.4

6.6

2.4

0.2

4.1

4.1

1994

4.3

3.8

5.9

2.1

6.3

3.3

4.3

4.6

4.3

1995

4.4

4.1

3.7

5.1

5.5

4.3

6.6

0.0

4.1

1996

4.5

3.2

4.2

1.9

3.1

0.0

1.4

1.4

3.9

1997

4.4

5.0

4.5

4.4

5.5

4.4

3.5

3.2

4.5

1998

5.1

6.0

6.1

3.0

3.6

3.7

6.3

7.8

5.2

1999

4.4

3.9

5.5

2.0

3.0

0.1

7.3

3.9

4.0

2000

2.5

1.1

2.6

3.7

-0.3

-0.9

4.9

2.9

1.9

2001

2.2

3.2

5.8

4.0

7.1

4.2

1.7

2.9

3.8

2002

2.9

3.0

4.8

1.2

3.6

2.7

0.0

3.5

3.2

2003

2.1

4.5

6.4

4.2

5.9

4.3

2.3

1.5

4.0

2004

1.7

2.4

5.0

0.9

3.8

3.4

5.6

2.3

2.8

2005

2.0

2.6

3.6

2.3

5.1

2.1

6.5

3.7

3.0

2006

1.9

2.7

4.8

0.6

7.1

2.2

5.2

3.6

3.3

2007

2.8

3.2

5.3

3.8

5.2

3.4

3.9

2.5

3.7

2008

-0.7

-1.9

0.4

-1.6

1.5

-1.4

1.2

3.4

-0.6

Source: ABS, Cat. No. 5220.0 Australian National Accounts: State Accounts, Table 1. Gross State Product, Chain volume measures and current prices.

Table A.8 GSP per capita benchmarked each year to Australian average

Year

NSW

Vic.

Qld

SA

WA

Tas

NT

ACT

Aust.

1990

101.1

97.5

91.0

92.3

117.3

84.4

141.3

130.5

100.0

1991

101.4

96.4

91.2

91.7

119.4

83.8

143.4

134.8

100.0

1992

101.3

95.3

92.7

90.1

123.2

84.4

140.6

133.3

100.0

1993

100.4

95.9

93.8

89.6

123.1

84.3

134.5

131.8

100.0

1994

99.9

96.3

92.8

89.6

125.7

83.5

128.7

131.5

100.0

1995

100.0

96.4

93.0

88.4

127.4

83.4

128.2

132.1

100.0

1996

100.3

96.9

91.6

90.2

128.5

84.6

129.0

127.2

100.0

1997

100.9

96.6

91.3

89.2

126.8

82.4

124.6

124.3

100.0

1998

100.8

97.3

90.8

89.5

127.4

83.5

122.3

124.2

100.0

1999

100.7

98.1

91.2

88.1

124.9

83.4

123.0

128.0

100.0

2000

101.1

98.1

92.0

86.9

123.5

81.2

126.3

128.3

100.0

2001

101.7

97.3

92.2

89.3

120.6

80.0

130.3

129.7

100.0

2002

100.3

96.8

93.3

90.2

124.4

81.3

128.2

129.0

100.0

2003

100.4

96.7

93.6

89.0

124.9

81.4

125.6

129.9

100.0

2004

99.2

97.2

94.6

89.8

126.8

81.6

124.4

127.8

100.0

2005

98.7

96.8

95.6

88.7

127.6

82.4

127.4

127.8

100.0

2006

98.3

96.4

95.2

88.5

129.5

82.2

130.6

128.9

100.0

2007

97.4

95.8

95.9

86.6

133.4

81.9

132.3

129.6

100.0

2008

97.1

95.3

96.7

87.2

134.3

82.3

131.5

128.5

100.0

Source: ABS, Cat. No. 5220.0 Australian National Accounts: State Accounts, Table 1. Gross State Product, Chain volume measures and current prices.

Table A.9 Median house prices in capital cities

Year

Sydney

Melbourne

Brisbane

Adelaide

Perth

Hobart

Darwin

Canberra

 

194,000

131,000

113,000

97,200

101,125

82,000

101,500

120,750

 

182,000

127,000

120,000

103,900

99,500

89,650

111,550

136,500

 

183,300

125,000

129,000

108,300

102,500

95,825

126,125

155,250

 

188,000

126,000

136,500

111,200

112,750

104,250

150,500

159,375

 

192,375

130,000

143,000

113,500

123,125

110,500

157,875

160,850

 

196,750

129,000

147,000

111,500

126,788

106,750

165,375

155,550

 

211,125

131,000

148,000

110,000

126,625

108,000

164,250

152,375

 

233,250

142,000

150,000

113,500

134,125

108,750

176,500

152,750

 

248,750

155,000

159,500

118,600

141,000

107,250

173,500

155,500

 

272,500

175,000

161,000

127,000

147,500

112,225

179,375

161,500

 

287,000

191,000

170,000

135,000

156,250

117,750

186,800

180,825

 

322,500

225,000

178,700

150,000

168,375

120,575

188,000

206,250

 

404,000

261,500

193,300

179,250

195,250

123,000

190,825

267,250

 

473,800

293,100

257,500

228,125

231,750

160,250

209,625

339,250

 

509,500

308,900

305,700

259,575

264,000

222,625

248,075

367,750

 

494,400

320,800

313,700

274,000

311,250

246,750

292,500

375,000

 

487,500

345,500

332,500

289,000

417,875

269,500

357,750

404,625

 

512,900

372,200

380,400

329,025

463,500

291,625

400,750

451,125

 

491,375

388,800

414,500

360,000

438,000

301,575

429,325

462,875

Sources: 1990-2001figures are based on data from states’ Valuer-General offices; 2002-2008 figures are based on ABS Cat. 6416.0.

Table A.10 Index of real house prices (CPI-adjusted) Index 2000-100

Year

Sydney

Melbourne

Brisbane

Adelaide

Perth

Hobart

Darwin

Canberra

Australia

1990

84.1

85.3

82.7

89.6

80.5

86.6

67.6

83.0

84.3

1991

76.4

80.1

85.1

92.7

76.8

91.8

72.0

90.9

81.1

1992

76.2

78.1

90.6

95.7

78.3

97.1

80.6

102.4

82.2

1993

76.8

77.3

94.1

96.5

84.6

103.8

94.5

103.3

83.7

1994

77.1

78.3

96.8

96.7

90.7

107.9

97.2

102.3

85.2

1995

75.4

74.3

95.1

90.8

89.2

99.7

97.3

94.5

82.2

1996

78.8

73.5

93.3

87.3

86.8

98.3

94.2

90.3

81.9

1997

86.9

79.5

94.3

89.8

91.7

98.7

101.0

90.2

87.1

1998

91.9

86.0

99.4

93.1

95.6

96.5

98.4

91.1

91.9

1999

99.2

95.7

98.9

98.2

98.6

99.5

100.3

93.2

97.8

2000

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

2001

107.6

112.8

100.7

106.4

103.2

98.1

96.4

109.2

107.3

2002

130.9

127.3

105.7

123.4

116.2

97.1

95.0

137.4

123.1

2003

149.4

138.8

137.1

152.9

134.2

123.1

101.5

169.7

142.9

2004

156.7

142.7

158.8

169.7

149.1

166.9

117.2

179.4

153.9

2005

148.4

144.6

158.9

174.8

171.5

180.4

134.9

178.5

155.4

2006

140.7

149.8

162.0

177.2

221.4

189.5

158.6

185.2

161.3

2007

145.0

158.0

181.5

197.6

240.6

200.8

174.0

202.2

172.8

2008

132.9

158.0

189.3

206.9

217.5

198.7

178.4

198.6

168.5

Source: Table A.8 adjusted by CPI as estimated in ABS 6401.1

Figure B.1 North West Release Areas

Figure B.2 South-West Release Areas

Applied Economics

Figure B.1 North West Release Areas

Applied Economics

Figure B.2 South West Release Areas

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