Call for urgent release of more greenfield land in SEQ to address deepening housing defecit, RPM reveals

RPM’s latest South-East Queensland Market Update reveals that the combined impact of higher building costs, higher interest rates, and record interstate migration has intensified the South-East Queensland housing crisis in the latest quarter, with the rental market particularly showing an increasing shortfall that is putting more pressure on tenants and new homebuyers.

South-East Queensland urgently needs more diversity in lot sizes in the greenfield market which will offer a greater variety of housing at various price points to prevent the deepening deficit of new properties to meet surging demand, according to RPM.

RPM’s Queensland Managing Director, Peter Neale, said record interstate migration has heightened the urgency to release more land and to provide affordable options that will meet the demands of new arrivals.

“This shortage has been compounded by record interstate migration to Queensland last year that drove the largest population growth of any Australian state in 2022, and it will become even more critical with the expected spike in international migrants over the short term,” said Mr Neale.

“Market forces at the moment are colliding simultaneously to exacerbate the critical housing shortage in South-East Queensland, which is further fuelled by a continuation of poor economic factors.”

“ABS Census data shows that the average rental property household size is declining, which means that even more dwellings are required to house the same number of people today than in the past.”

Despite housing construction reaching record levels over the past year, housing approvals in Queensland fell 15.4 per cent over the 12 months to April 2023.

The key finding of the RPM report is that the significant undersupply of housing product in South-East Queensland is unlikely to abate in the near to medium term without a coordinated approach to supply delivery.

“The solution is to increase supply given last year has demonstrated that there is no shortage of people seeking to purchase – they are largely constrained by affordability,” said Mr Neale.

“Consumer sentiment rose after the Reserve Bank paused its successive interest rate hikes in April, but then fell with the unexpected rise in May, which reflects the fragility of the current market,” said Neale. 

“Buyers will become more confident once rate increases subside, in the meantime, there needs to be a concerted effort by governments and councils in South-East Queensland to cut red tape and get approvals through faster. This is a critical enabler,” said Mr Neale.

“All levels of government are working to solve this crisis but quite simply, more land needs to be released and more diversified products need to be delivered,” said Mr Neale.

“This includes smaller land blocks for townhouses and terrace homes as affordability needs to be unlocked for buyers. It will also encourage more investors into the market to deliver much needed rental stock to South-East Queensland.

In fact, the RPM report states that buyers with an annual household income of $120,000 could only borrow $620,444 in May this year compared to $898,620 in April last year due to the 11 interest rate rises.

Developers need to carefully consider their product mix – taking wider issues such as affordability into the equation.

The RPM report has found the average buyer is finding it harder to get into the market due to the significant drop in their borrowing capacity. This may result in smaller homes, land lots, or a move further out to rural regions, where further land will need to be released.

“We witnessed this in Melbourne with the Small Lot Housing Code. Removing the red tape around small lot products initiated greater builder and developer acceptance – this saw demand pick up significantly.”

“The slow release of land in the region is constraining supply and deepening the problem, and the situation has become even more critical now because many apartment developers are shelving their projects because of high construction costs and unfavourable economic factors.”

“There needs to be a range of new initiatives to further support the growing needs of South-East Queensland. It is not only the greenfield market that requires support, the inner and middle ring through tackling planning hurdles and incentivising developers to re-enter the market also requires stimulus.”

The RPM report found that apartment approvals increased by nearly 40 per cent in the year to April. However, the number of apartments completed slumped as high-rise projects were side-lined by a 20 per cent increase in construction costs over the past two years.

“Many apartment projects have become commercially unviable for developers given the current economic conditions,” said Mr Neale.

"This has further aggravated the supply shortage amid the sharp increase in migration which will continue to push up rents and make renting unaffordable for many.”

Although Queensland’s residential vacancy rate improved marginally, it remains acute at 0.9 per cent in March. The RPM report notes that the crisis has been compounded by a continuing decline in rental stock and record low housing approvals across the state over the past 12 months.

“We estimate the state is 25,000 rental properties short of a healthy rental market; this will become even more pronounced as overseas migration increases throughout the year.”

“While we acknowledge the government’s intervention, there is still considerable work to do in order to address the challenges as there is a need for a more concerted effort if we are to address the deepening housing deficit in the South-East Queensland market,” said Mr Neale.