More land development will ease the supply shortage.

More residential land will be released for development over the next five years, according to  a new report titled -Outlook for Residential Land 2010 to 2015, by economic forecasters, BIS Shrapnel

The report claims that higher population growth, more stable interest rates and strong economic growth will cause lot development to increase over the next five years easing shortages in areas such as south-east Queensland and Sydney,

Report author Angie Zigomanis says the First Home Owner’s Grant contributed to lot production, but since that stimulus has been taken away development has fallen.However, he also says this is only a “slight pause” in development, and that higher incomes, more stable interest rates and higher consumer confidence will increase demand for land, especially in underdeveloped areas where shortages are affecting prices.

“We are expecting lot production to be at a higher level. We have a higher rate of population growth, and given the level of underbuilding over the last two or three years, there’s a catch-up that’s going to take place.”

“I think in places like Melbourne and Adelaide, lot production is quite good. But places like Sydney are coming off low bases, and Brisbane is a similar case.”

But while Zigomanis says higher production of lots should allow those supply/demand issues to ease, naturally bringing down price growth, he also says that prices won’t be heavily impacted as a result.

“Provided land production does increase, it will offset those shortages and help to take pressure off prices. But having said that, we’re expecting interest rates to reach peak in 2012 and that should keep prices higher.”


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