Policy

Strategic Land Supply Policy

Fifteen years of land supply

Clause 11.02-1S of the State Planning Policy Framework identifies the need to “Plan to accommodate projected population growth over at least a 15 year period and provide clear direction on locations where growth should occur.” Greenfield supply is one element of the land required to provide dwellings to service population growth. Supply is also provided through development on major redevelopment sites (10 or more dwelling which are monitored by the Urban Development Program – Redevelopment) and infill development.

Using the long-term average of lot approvals, there is an estimated 25 years of land supply remaining in the growth areas. Using the short-term average of lot approvals, this is reduced to 18 years.

Plan Melbourne 70:30 aspiration

Policy 2.1.2 of Plan Melbourne sets an aspirational scenario where 70% of net additional dwellings are located within established Melbourne and 30% in the growth areas. The 70:30 aspirational scenario is designed around a sustained change over a long time period. It is anticipated the share of new dwellings being built in the growth areas will decrease over time as greenfield land is consumed and development increases in the established parts of Melbourne.

Historically, the share of net additional dwellings in the established areas of Melbourne has approached 70%. Since 2016, the share of dwelling approvals occurring in the established parts of Melbourne have declined from 64% to 54% in 2019. This decline in the share of net dwelling approvals can be attributed to continued strong greenfield development.

Population growth prospects

Population growth is a key factor in the development of new housing. Before the coronavirus (COVID-19) pandemic, Victoria was the fastest growing state in Australia, reflecting its attractiveness as a place to live, work and study. However, the coronavirus (COVID-19) pandemic has had a negative impact on population growth.

As outlined in the Victorian Budget 2020/21 (Budget Paper 2 – Strategy and Outlook):

Victoria’s population is forecast to be unchanged in 2020-21, before growing by 0.3 per cent over 2021-22. As national borders reopen, and confidence in the economic outlook improves, population growth is expected to slowly pick up, to reach around 1.7 per cent by 2023-24. Nevertheless, this remains below the average annual growth rate of 2.3 per cent over the five years before the coronavirus (COVID-19) pandemic.

Victoria in Future is the official state government projection of population and households. Projections are based on trends and assumptions for births, life expectancy, migration, and living arrangements across Victoria.

Current housing activity

While Victoria’s population is forecast to remain unchanged in 2020-21, housing approvals, particularly for detached houses in the growth areas, have reached record high levels. Consultation undertaken by the National Housing Finance and Investment Corporation for its State of the Nation’s Housing 2020 report suggests “… state government stamp duty concessions and the Commonwealth’s HomeBuilder program is helping to bring forward investment and support near-term demand. The combination of government stimulus, record low interest rates and pent-up demand through the crisis is translating into above average residential sales for some large developers, primarily for new detached dwellings.” The Commonwealth Government extended applications for the HomeBuilder Program to 14 April 2021.

The high level of building approvals is also reflected in the large numbers of lots released with a title over 2020 with 22,740 lots, which is slightly higher than the 22,288 lots in 2019.

In the established parts of Melbourne dwelling approvals have declined since 2017 (the last peak) when 36,660 dwellings were approved. A total of 24,525 dwellings were approved in 2020 within the established parts of Melbourne which is slightly less than the 25,734 dwellings approved in 2019. In 2020, Dwelling approvals in middle and outer Melbourne LGAs declined compared to 2019 while approvals in inner Melbourne increased by a thousand dwellings.