Prices up, but rapacious land agency fails again 

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“Working-class families, people working in the services sector and others in the bottom two income quintiles simply cannot afford to pay the exorbitant land prices being demanded by the government,” laments JON STANHOPE

HANDS up if you’ve read the 2018-19 Suburban Land Agency (SLA) annual report.

Jon Stanhope.

I thought as much. The lack of interest in the SLA, despite its importance to and impact on our city, was confirmed by a story I was recently told about a trivia night fund-raising event at which one of the questions was: “Name a member of the board of the SLA?” You guessed right, not a single person in the room could answer the question.

To be fair, the follow up question (for a bonus point) was: “Name the ACT Minister for Housing.” The question apparently caused a near riot when the answer was revealed because half the room, having decided that it was a trick question, answered that there wasn’t one while the other half nominated Nick Georgalis, principal of Geocon, convinced that it had to be him on the basis he seems to be the only person in Canberra building housing and who understands what is going on.

Life is, of course, short and I agree that reading ACT government annual reports doesn’t do much to enhance its quality.

My colleague Khalid Ahmed and I have, selflessly, read the SLA annual report (both of us probably do need to get a life) and I am happy to provide the following summary of what it revealed to us. 

In short, the SLA did not meet any of its targets for land revenue, operating profit, dividend and total returns to the territory, for the year. This is now the second year in a row that the SLA has comprehensively failed to meet its targets.

Revenue from land sales was $484 million which is 31 per cent below the budget target of $701 million. The SLA operating surplus was $191 million or 17 per cent below the budget estimate of $229 million. The SLA’s total returns to the territory were $377 million against a target of $503 million, a shortfall of 25 per cent.

In seeking to explain its poor financial performance the SLA blames, among other things, lower land sales volumes and general market conditions and points to changing housing demand preferences from buyers (from freestanding housing to apartments and townhouses).

The SLA also seeks to make much of the fact that as at June 30 there were 600 blocks of land available for purchase from SLA estates. 

Regarding the claim that there has been a dramatic change in housing choice or preference from standalone dwellings to flats and apartments, I challenge the SLA to produce the evidence that supports that claim. 

The only statistically significant research done on the issue in the last decade was the major 2015 survey and report undertaken on the government’s behalf by Winton Sustainable Research Strategies, which found that standalone housing was the first preference of 85 per cent of Canberrans. There is no extant evidence to challenge the central thrust of that report.

The indisputable reason for there being unsold land available for purchase from the SLA is that it is out of the reach of half the residents of Canberra. Working-class families, people working in the services sector and others in the bottom two income quintiles simply cannot afford to pay the exorbitant prices being demanded by the government.

A search of the SLA website in October revealed that the lowest priced land currently available in Canberra, over the counter, is $295,000 or $865 per square metre, for a 341 square-metre block in Taylor. 

Using standard housing industry calculators of the cost of housing construction in Canberra, the low-end estimate for purchasing this block and constructing a modest three-bedroom house on it would be $550,000. 

On the basis of generally accepted criteria of severely unaffordable house-price-to-income ratios, the price of this land/house package would be beyond all households in the bottom two income quintiles and perhaps half of those in the third quintile. In other words, half the families living in Canberra, and not in the housing market, could not afford to buy and build on the cheapest block of land currently offered for sale by the ACT government. To be honest, they could probably not even save enough for the deposit. 

It is instructive to compare the 2018-19 and 2017-18 actual financial and other results of the SLA. 

For instance, despite not meeting any of its financial targets, the SLA’s revenue from land sales was 24 per cent higher in 2018-19 and its operating surplus increased by 18 per cent. The increase in revenue was achieved even though the SLA sold 25 per cent, or 999 dwelling sites, less in 2018-19 than it sold in 2017-18.

Let me repeat that: in 2018-19 the SLA, the ACT government’s monopoly land supplier, reduced the amount of land it sold for housing by 25 per cent but increased its revenue from land sales by 24 per cent. 

PS: The SLA annual report contains the West Belconnen Joint Venture (Ginninderry) Financial Statements. If you suffer from insomnia, this is the chapter for you unless, like me, you have an inquiring mind and can’t rest when confronted by a conundrum such as presented by the following sentence in paragraph (o) on page 164 of the report viz: “Up until June 2018 the Suburban Land Agency provided an unsecured loan to the Joint Venture…”

Now, what possible reason would the ACT government or a minister have had for granting an unsecured loan to a private land-development company?

 

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Jon Stanhope
Jon Stanhope was Chief Minister from 2001 to 2011 and represented Ginninderra for the Labor Party from 1998. He is the only Chief Minister to have governed with a majority in the Assembly.

1 COMMENT

  1. Dear Jon. Excellent article highlighting the corruption of the land market by rent seekers and speculators. I’ve heard that developers in Canberra are strategising to change all leasehold to freehold.

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