SOLID GROUND

Why land is so precious around Sydney, originally published in Sydney Morning Herald’s Domain, November 2005


By Alex May

 We all know that Sydney has a shortage of drinking water, but there is also a shortage of affordable land.It's almost as if this city has a land restrictions policy: "No lounging around in big backyards, except for Wednesdays and Sundays before 10am and after 4pm. Best go to your local park for a fix of the green stuff. And whatever you do: don't expect to go back to the glory days of quarter acre blocks. It's townhouses and highrises for you Sydneysiders."
As Australia's most populous city, Sydney accommodates more than four million people. Land is scarce in this city due to its steep and varied geography - there is national park to the north and south, the Blue Mountains to the west and only ocean to the east.
By comparison, Melbourne is surrounded by level, readily subdividable land which BIS Shrapbel's Robert Mellor says is about 30 per cent cheaper than land on the fringes of Sydney which has an average cost of $280,000 a lot.
And then there is the NSW government's land release policy.
Mellor says the State Government has released minimal land for residential development in recent years, preferring to encourage medium density developments near train stations and high-rise developments in the inner city.
Urban Development Institute of Australia executive director David Poole says greenfields land release (cutting new lots into broadacre land holdings) in Sydney has been at historic lows, with only 3000 lots released in the past 12 months.
 Mellor says the bottom line is that Sydney will always have a shortage of land regardless of a government boost to land release policies. Every humble suburban house that sits on its own plot of gold can expect future price growth based largely on demand for the land portion of the property.
 "To physically produce lower-priced land in Sydney is not really possible. I think the future for Sydney is that land prices will always move up above and beyond the growth in people's incomes," he says.
With the softening of residential property prices since 2003, prices for land have fallen in line with the market. However Mellor says that once the market regains stability from 2008, vacant land in Sydney will be worth more than ever.
 Macquarie Bank's head of property research Rod Cornish agrees, saying the most valuable land in Sydney has unique qualities such as water views or proximity to infrastructure like workplaces, roads, schools, shops and hospitals.
 "It's all very well to think there is plenty of land to develop in Sydney, but if it doesn't have any infrastructure in place, then it won't really be in demand," he says.
THE PROBLEM WITH SPRAWL
Sydney has spent the past 200 years sprawling from the city centre, often along train lines. And then in the 1960s and 1970s to suburban subdivisions to the west, the Hills District, Sutherland Shire and Northern Beaches.
There are now greenfields developments as far away as Wollongong - such as Haywards Bay - that are attracting Sydneysiders priced out of the local market. Land in Haywards Bay starts at $199,000. This contrasts with Sydney's most expensive vacant land sale - $6 million for a 569 sq metre block in Baden Street, Neutral Bay, last October.
 But even if Sydney wasn't restricted by its geographic limitations, the current State Government has been reluctant to encourage sprawl because of the high cost of providing infrastructure. The Kellyville experience of allowing development before public transport, swimming pools and libraries provides a lesson.
 "Land releases in the north-west area in the 1990s were not matched by a strong transport and infrastructure vision. This has led to a reliance on roads and limited employment opportunities and community and social services," says a spokeswoman for Planning Minister Frank Sartor.
The Government has now bowed to pressure to focus on greenfields land releases and is focusing on the so-called growth centres of the north-west and south-west (which is also referred to loosely as Bringelly). These growth centres will accommodate 160,000 new dwellings in the next 25 to 30 years.
While fine detail on the planning policies for the growth centres has not yet been released, the state government has made it clear new greenfields releases will include some kind of levy per block to fund basic infrastructure like roads and schools.
Mellor says development in the Bringelly area raises issues of environmental sustainability, especially air quality, however it is one of the few remaining areas of Sydney with large areas of unoccupied land.
Planning Minister Frank Sartor's spokeswoman Zoe Allebone says there are currently 21,000 zoned and serviced lots available to Sydney developers for residential subdivision, some in the south-west but the majority in the north-west. Another 50,000 lots are planned to be made available before 2007.
Ms Allebone says some of the lots that will be zoned and available to developers before the end of 2006 include:
" 6000 lots at Balmoral Road in the Baulkham Hills council area;
" 1600 lots at Rouse Hill in the north west
" 3500 lots at North Kellyville in the north west
" 4000 lots at Second Ponds Creek in the north west
" 11,000 lots in the Blacktown council area
" 2500 lots at Penrith in the west
" 7000 lots at Oran Park in the south west
" 5500 lots at Edmondson Park in the south west
" 2000 lots at Hoxton Park in the south west.
Urban Development Institute of Australia executive director David Poole says these newly announced land releases won't necessarily all happen, as many developers can't make the subdivisions commercially viable.
"Those landowners want very high prices and with infrastructure levies of $25,000 to $60,000 per block applying in Edmonson Park, it is impossible to deliver lots to the market at prices people can afford," he says.
Cornish says it will take at least three years after a developer buys land before it becomes available for a purchaser to build a house on.
THE MASTERPLANNED ESTATES
But what is the future for freestanding houses in land-starved Sydney? Are we all destined to live nose-to-nose with our neighbours and head to the park for a fix of open space?
Probably. But higher densities won't necessarily mean poorer lifestyle or amenity.
Poole says the average lot size during the 1990s in Sydney shrunk to around 450 sq m, and it will shrink even further in the next 10 years. "The densities will be a lot higher. Four hundred square metres will be considered a large block," he says.
But the trick to denser living is smarter design, often called "master planning", which means the end of unappealing generic tracts of houses isolated from basic infrastructure like public transport.
New land releases like the Prince Henry site at Little Bay in Sydney's east (see breakout) pride themselves on their "master planning", and most offer smaller lots than the old quarter acre block, but easy access to parks or golf courses, schools, hospitals and public transport.
Poole says new housing developments won't have the ugly suburban stamp that they had in the past, simply because land is too valuable.
"Estates with nice parks and walkways are the way of the future. It's all about community," he says.
CASE STUDY
When Ramani Venkatramani’s child had the misfortune of being admitted to the old Prince Henry hospital back in the 1990s, it changed his life.
“It all worked out fine for my child, but I just could not stop saying to myself ‘what a wonderful place this hospital is in’,” he says. “Whenever friends or parents came from India to visit Sydney, I would take them to this site and show them how beautiful it was, how open, how close to the ocean.”
When Mr Venkatramani found out the hospital was closing down and residential land would be made available on the Prince Henry site, he immediately registered his interest and nervously bid on a 450 sq m block of land on Guddeteh Rd with ocean views in April. The blocks of land sold for an average price of $1.6 million.
 “There are not many things in life that I absolutely love – I don’t buy watches or expensive jewellery or clothes and the family knew I really wanted this position so they let me go for it and supported me through the auction process,” he says.
The Venkatramanis currently live in a four-bedroom, three-bathroom house on 850 sq m in Strathfield and plan to build a four-bedroom house on their new block of land within the next 12 months.
“Vacant land of this description is very rare. It’s not just a singular block, but a whole area that will grow and develop within twenty minutes of the city and a two-minute walk to the ocean.”
The Prince Henry site is being masterplanned as a “coastal village” and has a golf course, restored heritage buildings and plans for apartments and townhouses as well as freestanding houses. Fourteen new lots of land on the site are scheduled for release on October 22 and will be auctioned with price expectations between $900,000 and more than $1.6 million.