Policy

Fifteen years of land supply

Clause 11.02-1S of the State Planning Policy Framework of the planning scheme 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.” Redevelopment land supply is one element of the land required to provide dwellings to service population growth. Supply is also provided through greenfield land which is monitored by the Urban Development Program – Greenfield Land and infill development.

Unlike the location of future greenfield development, which has been identified through a range of strategic planning documents, the horizon for major redevelopment sites is shorter. Given the short-term nature of identifying major redevelopment sites, an assessment of the number of years of supply for major redevelopment sites cannot be made using site-specific information. However, monitoring of major redevelopment sites over a number of years indicates that the market identifies new opportunities.

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 44% in 2021. This decline in the share of net dwelling approvals can be attributed to continued strong greenfield development. Demand for greenfield housing remained strong driven by federal and state stimulus initiatives such as Homebuilder to maintain construction and development activity during the coronavirus (COVID-19) pandemic, that enabled development to be brought forward.

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.

The population grew at an average of more than 2.0 per cent per annum for most of the previous decade. Victoria’s population decreased during the pandemic period. This was the first decrease in many years.

Victoria’s population peaked at almost 6.694 million people in June 2020. Growth was below 100,000 for the year though, compared with an average growth of 140,00 for the five previous years. During the year 2020/21 Victoria’s population decreased by 44,700 people to finish at 6.649 million in June 2021.

There is considerable uncertainty around the post-COVID future. It is unknown when Victoria will re-open for a return to ‘normal’ levels of overseas migration. There is a common assumption driving some published projections. It is assumed migration will return over two-to-three years. Recent projections produced by the Commonwealth and Victorian Governments contain similar assumptions and short-term results.

The 2022-23 State Budget projections show Victoria’s population growing by 0.1 per cent in 2021-2022 before growth increases to 1.1 per cent in 2022-2023 and 1.6 per cent over the following year as borders reopen.

The Commonwealth Budget projects that Victoria's population is projected to increase by 0.5 per cent in 2021-2022 before growth increases to 1.4 per cent in 2022-2023 and 1.8 per cent over the following year.

Current housing activity

Despite the disruption to population growth, residential development activity in Victoria remains strong.

In the 12 months to January 2022, there were about 70,000 new homes approved for construction across Victoria. About 47,000 of these approvals were for detached houses, one of the highest number of approvals ever recorded over a 12-month period.

There were also nearly 13,000 approvals for medium-density units and townhouses, and about 10,000 approvals for higher-density apartments. Most of these were located in the established parts of Melbourne.

Victoria currently leads Australia in residential building activity. During the same 12-month period New South Wales saw about 62,000 approvals and Queensland about 44,000 approvals. Much of the new housing across Victoria has been built in greenfield residential areas - both in Metropolitan Melbourne and Regional Victoria.