contrast, construction costs have only risen in line utility providers. The completion of stage four marks with general price inflation. the point at which the developer can commence So why has the increase in land prices been so actual work on the ground. unrelenting? Unlike other items in the economy, the The last stage in construction will be subdivision land supply tap is not easy to adjust in response to completion approval, or stage five. The physical the ebb and flow of demand for new housing. construction of new lots, roads, installation To reach the point of being a fully-fledged lot of utilities and other public infrastructure are suitable for the construction of a new house, completed at this time. greenfield land must first pass through a drawn out Once physical construction is complete, the process which can often last a decade or longer. land has reached stage six and the new lots are This means that stronger demand for new housing registered individually with the state authority. This cannot immediately be met by more supply. So the provides each lot with a legal identity allowing it to price of land goes up while only a modest increase be bought and sold. in land supply can be realised over the short to medium term. This lengthy seven-stage process In analysing how raw land becomes shovel means that land cannot be released ready, HIA has drawn on previous work by the quickly to meet demand former National Housing Supply Council and developed a seven-stage model to characterise the lifecycle of new residential land. The pace at which The process of land development concludes the land traverses the first few stages is largely the when lots are sold to market, in stage seven. Only remit of state and local governments: stage one then can the construction of new homes on the land involves the designation of raw, greenfield land for begin. urban development. This is normally a high-level This lengthy seven-stage process means that decision undertaken by the state government land cannot be released quickly to meet demand. as part of a regional plan or equivalent strategic Solving this dilemma is not a simple task. But for planning exercise and involves large tranches of a problem to be solved, it must first be measured land being identified for urban use. At stage two, properly. land is then zoned for urban development. Ensuring that a better balance of supply and From this point onwards, the role of local demand is made in the residential land market government and residential developers becomes would be aided by state governments collecting and more prominent. Large-scale land development is publishing data on the amount of land at each point an expensive and risky business activity involving in the seven-stage process. very substantial sums of money being tied up for On this score, HIA research has found that the a number of years before any actual earnings are performance of the states varies. Neither Tasmania made. The lengthy time gap between the initiation nor the Northern Territory produce any regular and completion of any residential land development figures on residential land supply. Western Australia process means that developers run the risk of offers figures for three of the seven stages. Victoria, eventually selling their finished product in an Queensland and South Australia all provide figures environment of weak demand and declining prices. for five of the seven stages. In the past, NSW had Based on the heavy expense and considerable also made figures available for five of the stages, risk, new residential land projects will only proceed but has not produced new information in over once the business case is solid. Residential two years. developers will seek subdivision planning approval Collecting this information is essential to for new projects – this is stage three. These understanding the changing nature of house prices. approvals involve lengthy negotiation with the National coordination and public reporting of the local government to address a range of matters information in a consistent and timely manner is including environmental constraints on the land, equally critical. HIA’s research findings highlight the the timeframe for the construction of essential lack of consistency in the reporting. The timeliness of utilities and the provision of the public infrastructure reporting is poor and there is no nationally coordinated necessary to support the proposed development. approach. The issue of land supply would benefit At stage four, a subdivision works approval is from governments, both state and federal, taking a sought by the developer. This stage relates to the cohesive approach to collecting and reporting on the nitty-gritty logistics of constructing the development various stages of land-supply information. including arrangements for utilities. Like stage The latest edition of the HIA-CoreLogic three, this can be a drawn out and time-consuming Residential Land Report can be ordered at: process of negotiation between the developer, local www.hia.com.au/business-information/economic- government, and a number of state agencies and information/economic-publications SEPTEMBER 2018 HOUSING 43