Land Shortage

State Government Response on Land Shortage – Score 7/10

  • On 16 May 2011 Minister for Planning, Matthew Guy, announced a review of possible  urban growth boundary inclusions to address the current metropolitan land shortage.  It will determine possible inclusions of properties within the urban growth boundary affecting Wyndham, Melton, Hume, Whittlesea, Mitchell, Casey and Cardinia growth areas. The outcomes of the review and the time frame for inclusion of the new areas is unclear.
  • A new Small Housing Lots Code is being developed aimed at allowing detached homes to be built on a lots less than 300 square metres without the hassle of applying for a planning permit. This will apply in some parts of the Growth Areas, allowing land in the outer suburbs to be used more efficiently and offering greater housing choice.

Land Shortage

Restricting the amount of land available for housing development is undermining Housing Affordability.

In 1995, the median price of a residential lot in Melbourne was $55,000. Today, it is $208,00[1]. That’s a rise of over 278 per cent!

In regional Victorians, land affordability has not fared much better. In 1995, the median price of a regional residential lot was $33,500. Today it is $121,000[2]. An increase of  260 per cent!

Graph 14: Median Prices of Vacant Victorian Housing Blocks in Major Population Centres[3]


Victoria’s population is forecast to grow by almost 2 million people by 2036[4]. This will require the construction of an additional 600,000 homes on residential land lots overwhelmingly located in the Growth Area regions of Casey-Cardinia, Hume, Melton-Caroline Springs, Whittlesea and Wyndham[5].

How Land Shortages Undermine Housing Affordability

One of the most important requirements for the successful management of land prices during times of high population growth is the ability of government to ensure that land supply remains ahead of land demand.

Since 2002 land release in Melbourne has been constrained by an ‘Urban Growth Boundary’, aimed at limiting suburban sprawl.  At the same time the growth boundary was put in place, key areas were identified for medium or high density development (that is, units apartments). 

Regardless of the encouragement given to medium density developments, as a single detached home is the only development that can be approved without a planning permit, this tends to be the development of choice in many areas. 

As detached houses (which take up a lot of space) have dominated new developmenst in the Growth Areas, land supply is now at capacity. This is pushing up both land prices in absolute terms, and the cost of new  housing construction.

For the first time on record, at the end of 2010 the median cost of land in the Growth Areas was more than the median construction cost of the home!

Master Builders Position

Melbourne’s Growth Areas offer the most significant potential for new housing stock. However these areas are now at capacity with demand for new lots outstripping supply.

Meanwhile the conservative planning policies continue to offer limited opportunity for building of varied housing stock (units and apartments). 

Logical inclusions of the Urban Growth Boundary are critical. However these must be combined with a simpler planning policy that allows for development of diverse housing stock – otherwise the current expansions will be no more than a stop gap measure.

At the same time, increased investment in roads and public transport to the Growth Areas is needed to increase the attractiveness of living in these suburbs.

For more information on land supply issues in Victoria, visit the links below:

Growth Areas Authority

Department of Planning and Community Development

Residential Land Bulletin – DPCD

National Housing Supply Council

[1] Victorian Valuer-General
[2] Victorian Valuer-General
[3] Victorian Valuer-General
[4] Department of Planning and Community Development, Victoria in the Future 2008, Summary of Components of Population Change
[5] Department of Planning and Community Development, Housing Growth Requirements, as at April 2009
[6] Department of Planning and Community Development, Urban Development Program 2008, P1, 1.1 Purpose and context 
[7] Department of Planning and Community Development, Urban Development Program 2009 and Residential Land Bulletin, June Quarter 2010
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