Greater Geelong Amendment C312: St Leonards Structure Plan

Expert Evidence Statement

Matt Ainsaar, Managing Director, Urban Enterprise Pty Ltd

Residential Land Demand and Supply

November 2014

Contents

1. qualifications

2. engagement

3. Context

4. Land Demand and Supply

5. Conclusions

URBAN ENTERPRISE PTY LTD /
November 2014

1.qualifications

My name is Matt Ainsaar and I am the Managing Director and founder of Urban Enterprise Pty Ltd.
Urban Enterprise is a firm of urban planners, land economists and tourism planners based in Melbourne. The firm has more than 25 years experience providing consultancy services to all levels of Government and a wide range of private sector organisations in Victoria and in other States of Australia.
I am a qualified planner and land economist with more than 35 years experience.
Urban Enterprise has a track record of successfully preparing land demand and supply assessments for Councils and landowners. I have appeared as an expert witness at Planning Panel hearings in respect of land demand and supply on many occasions.
My educational qualifications and memberships of professional associations include:

Bachelor of Town and Regional Planning, University of Melbourne
Graduate Diploma of Property, RMIT University
Member, Planning Institute of Australia
Member, Victorian Planning and Environmental Law Association
Associate, Australian Property Institute (Certified Practising Professional).

2.engagement

I was instructed by Norton Rose Fulbright on behalf of St Leonards Property Holdings(SLPH) to prepare an expert evidence statement to present at the Planning Panel hearing in relation to this matter.
My instructions were to prepare an assessment of the current supply of and demand for residential land in St Leonards and to prepare an expert evidence statement regarding the findings of the assessment.
I have reviewed the amendment documentation and other relevant documents and policies. Documentation reviewed includes:

St Leonards Structure Plan, City of Greater Geelong, February 2014 (2014 Structure Plan);
St Leonards Structure Plan, City of Greater Geelong, September 2006 (2006 Structure Plan);
G21 Region Plan, G21 Geelong Region Alliance, 2007;
G21 Regional Growth Plan and implementation Plan, Geelong Region Alliance, 2013;
G21 Land Supply Monitor, Spatial Economics; and
Planning Scheme Amendment C312 documentation;

I am familiar with the town of St Leonards and the surrounding area.
A copy of the relevant information that is required to accord with the Planning Panels Victoria – Expert Evidence is attached at Appendix A to this report.

3.Context

the amendment

Planning Scheme Amendment C312 to the Greater Geelong Planning Scheme (AmendmentC312) proposes to implement the recommendations of the 2014 Structure Plan.
Amendment C312 seeks to alter the strategic directions and land use policies for St Leonards moving forward, in line with the new Structure Plan by amending Clause 21.14 of the Planning Scheme. The proposed revised policy:

Adds a new objective for St Leonards to “Support the development of Growth Areas 1 and 2 identified on the Structure Plan map”;
Introduces the 2014 Structure Plan Map;
Adds the rezoning of the St Leonards Growth Areas to the list of implementation actions; and
Includes the 2014 Structure Plan as a reference document.

The 2014 Structure Plan found that existing residential zoned land supply in St Leonards was limited to approximately 9-10 years supply (including 3-4 years of broadhectare land and 6 years of vacant lot supply, p. 92).Subsequently, the 2014 Structure Plan recommended rezoning of all land designated as “potential future growth” in the previous 2006 St Leonards Structure Plan within the Settlement Boundary in order to meet demand.
The 2014 Structure Plan map is shown in Figure 1 below. Land designated for rezoning is identified as Growth Area 1 and Growth Area 2.

Figure 12014 Structure Plan Map

Source: St Leonards Structure Plan 2014, City of Greater Geelong.

Policy

The Victorian Planning Provisions state that planning authorities should “plan to accommodate projected population growth over at least a 15 year period and provide clear direction on locations where growth should occur.” (Clause 11.02-1)
The G21 Regional Growth Plan (RGP) provides the overarching regional strategy for urban growth in the Geelong region, including the Bellarine Peninsula. The RGP provides strategic support for urban growth on the Bellarine Peninsula to be directed to Ocean Grove, Drysdale and Leopold, with growth in St Leonards to be confined to land within the existing town boundary.
The RGP (and associated Implementation Plan, 2013) includes the following observations regarding land supply and demand:

A critical driver for managing and sustaining growth in the region is an “adequate land supply in the region across varioushousing, industry and commercial market segmentsthat provides for choice and affordability and whichcan respond to increased growth activity”; (p.24)
“Rural and coastal settlements [such as St Leonards] willcontinue to experience modest growth as a result oftake-up of holiday homes, infill development anddemographic changes. These towns will continue toplay an important tourism role and provide a rangeof services to surrounding areas, however growth isto be limited to identified settlement boundaries.” (p.28);
Longer term growth areas are identified in the plan due to a range of factors and variables, including:
“The difficulty of predicting the actual growth rate. Future growth rates are anticipated to be between 1.5% and 2.5% over the life of the Growth Plan”;
“The opportunity to provide a competitive house and land market”; and
“The need to ensure the range of housing options and market segments have sufficient supply to respond to market interest, demand and activity, particularly to the west of Melbourne.” (RGP, p.29);
Development of growth area land within the settlement boundaries of sewered towns such as St Leonards is considered a short term priority (Priority 2 - Short Term Planned Growth”). (RGP, p.37);
The only urban growth direction provided specifically for the smaller towns on the Bellarine Peninsula is to “Limit growth in adjoining coastal settlements of Barwon Heads, Indented Head, St Leonards, Portarlington, Queenscliff and Point Lonsdale to existing settlement boundaries as per Structure Plans and Coastal Spaces Strategy.” (RGP, p.50).
“A significant portion of theBellarine’s broad hectare supply lies within OceanGrove and Drysdale/Clifton Springs with significantunzoned planned growth supply identified inDrysdale/Clifton Springs, Leopold and St Leonards. (G21 Regional Growth Plan – Implementation Plan, Page 81).

The Greater Geelong Planning Scheme designates locations for urban growth in the municipality in the municipal strategic framework (Clause 21.04), which identifies urban growth locations at Armstrong Creek, Lara, Leopold, Ocean Grove and Jetty Road (Drysdale).

4.Land Demand and Supply

Introduction

In this section I provide the findings of my assessment of residential land demand and supply in St Leonards.
My assessment was prepared using base level information included in the 2014 Structure Plan, augmented by research conducted by Urban Enterprise including:

ABS Census data;
G21 Land Supply information and updated aerial imagery;
A Guide to Property Values; and
Information provided by SLPH regarding market segments and lot sizes.

current Residential Land supply

My assessment of current (2014) residential land supply in St Leonards employed the following method

Obtain the most recent vacant lot supply and broadhectare lot capacity data from the G21 Land Supply Monitor as a baseline supply;
Update the broadhectare land supply capacity based the 2014 Structure Plan;
Deduct any lots identified in the G21 Supply Monitor as ‘vacant’ which have since had a dwelling constructed through interrogation of aerial imagery within the G21 Supply Monitor.

The broadhectare category includes2 main areas:

St Leonards Golf Course; and
Swan View estate – remaining land.

Table 1 shows my assessment of current residential lot supply by category.

TABLE 1residential Lot Supply 2014, St Leonards

Estimates by others and source / Date / Revised by / Current Lot Supply / Comments
Vacant lots / 339; G21, as at March 2013 / Mar-13 / Urban Enterprise / 292 / UE removed all lots shown as vacant but with dwelling evident on Google Aerial with G21 tool.
Broadhectare / 190; G21 / Mar-13 / CoGG (Structure Plan) / 245 / Council estimates adopted.
Total Supply / 529 / 537

Source: Urban Enterprise, using G21 Land Supply Monitor and CoGG.

Figure 2Land Supply Map

Source: G21 Land Supply Monitor.

It should be noted that the supply figures represent a theoretical maximum total supply of residential lots. Some lots may not be available to the market for a number of years due to a range of factors, including:

Lots and land held for investment purposes that will not be subdivided or placed on the market over the term of this assessment;
Lots and land held by individuals who do not have the resources to develop the land over the term of this assessment;
Lots and land that may be constrained due to a variety of factors such as vegetation, topography, soil conditions, flooding/drainage, and a lack of or cost of infrastructure and services.

As a result, I consider that the actual lot supply is likely to be somewhat less than this theoretical maximum supply. A number of the vacant lots in St Leonards, particularly those within the established township area, may not be made available to the market over the next 15 years. This is demonstrated by the fact that only 15% of new dwellings approved over the period 2005 – 2012 were in established areas (G21 Land Supply Monitor, Housing Development Data), with the majority of new dwellings being constructed in recently released estates.
I also understand through discussions with SLPH that many lots in the recently developed Sea Change Estate were purchased by residents of other areas with the intention of constructing a dwelling to retire in, or to construct a holiday home at some point in the future. This is reflected by the number of lots which remain vacant in the Sea Change Estate despite 70% of lots being sold within 2 years ofcommencement of development in 2001, and the remainder sold over the next 4 years.
In my opinion, these factors combine to indicate that many of the vacant lots in the town will not be made available to the market. I therefore consider it appropriate to apply a vacant lot supply discount of 20% in order to reflect that many of these lots will not be made available to the market in the short to medium term.
The application of a 20% discount on vacant lots results in a current (2014) supply of 479 lots in St Leonards.

Future land supply

The proposed rezoning of the two growth areas in St Leonards would increase the lot supply by approximately 1,403 lots, across both Growth Area 1 (481 lots) and Growth Area 2 (922 lots). I have adopted these lot yields from the 2014 Structure Plan.

TABLE 2Future Land Supply

Future Lot Yield / Approximate Gross Area (ha) / Density (approximate dwellings per ha)
Growth Area 1 / 481 / 38.5ha / 12.5
Growth Area 2 / 922 / 74ha / 12.5
Total / 1403 / 112.5 / 12.5

Source: St Leonards Structure Plan 2014, density derived by Urban Enterprise.

The land ownership pattern in the growth areas is well suited to development. I understand that the land in Growth Area 1 is in single ownership, and Growth Area 2 with 7 parcels, 6 of which are in excess of 8ha in area. Each growth area is contiguous with the existing urban area of St Leonards.
In my opinion, the rezoning of two separate growth areas or growth fronts is a sound approach in this instance for the following reasons:

Creating 2 new growth fronts would minimise the risk of relying on one land owner (i.e. Growth Area 1) for the long term residential needs of the township. Land in Growth Area 2 is within multiple (but not fragmented) ownership, which would reduce the dependence on the capacity and intentions of a single owner or developer to deliver new residential supply to the market;
Greater competition in the market can be generated by releasing separate greenfield growth fronts, thus assisting in limiting price growth and thereby increasing affordability and a variety of lot sizes and estate types to cater to different segments of the market;
Growth Area 2 is located adjacent to the most recent major residential development (Sea Change), and is expected to provide for linkages between the two estates once developed. Growth Area 2 is better located with regard to the St Leonards Boat Ramp than Growth Area 1, which is a key attraction to holiday home owners in the area.

I consider that each of the growth areas is suited to residential development in St Leonards, and would be appropriate for rezoning. Due to the factors explained above, I consider that Growth Area 2 would be a lower risk option in terms of adding to the land supply, however the simultaneous rezoning of both growth areas would be a sensible approach in my opinion.
I address the land supply implications of this approach later in my evidence.

Demand for Residential Land

In order to provide a weight of evidence approach to estimatinglong run demand for housing in St Leonards, I have analysed a number of indicators of historical demand over different time periods, including dwelling approvals, Housing Development Data and ABS Census dwelling counts.
Figure 3 shows historical dwelling approvals in St Leonards by year sourced from the 2006 and 2014 Structure Plans. The low rate of dwelling approvals in the 1990s of around 10 dwellings per year significantly increased once the Sea Change Estate was approved in the early 2000s, with a steady increase in the take up of new dwellings to 60 – 75 dwellings per annum.
This indicates that it is highly likely that the rate of dwelling growth was constrained by the lack of available land supply in the 1990s (or the lack of appropriate residential product to meet the market), and the true rate of demand (once latent demand in the early-mid 2000s was absorbed by the Sea Change Estate) is now demonstrated to be in the order of 60 – 75 dwellings per annum.
I consider that the recent decrease in dwelling approvals (2011-13) reflects the lack of new supply being made available to the market in St Leonards, with only a small number of new lots being released in recent years (according to G21 Land Supply Monitor), primarily in the vicinity of the Golf Course.

Figure 3Dwelling Approvals in St Leonards, 1991/92 – 2012/13

Source: City of Greater Geelong. Note: no data included for 2008/9.

Other indicators of dwelling activity include:

The ABS Census count of dwellings, which shows that the average annual increase between 2006 and 2011 was 51 dwellings per annum; and
Housing construction data included in the G21 Land Supply Monitor which indicates that an average of 61 dwellings were constructed in St Leonards between 2005 and 2012.

Based on a weight of evidence approach, I consider that an appropriate long-run dwelling demand rate for St Leonards is 60 – 75 dwellings per annum.

TABLE 3Dwelling Approvals, St Leonards

Period / Dwellings per annum / Source: / Analysis by:
2003-13 / 62 / City of Greater Geelong / City of Greater Geelong
2009-10 / 88 / City of Greater Geelong / City of Greater Geelong
2007-13 / 66 / City of Greater Geelong / Urban Enterprise
2006-11 / 51 / ABS Census / Urban Enterprise
2005-12 / 61 / Housing Development Data G21 / Spatial Economics
Growth range / 51 - 88 / As above / Urban Enterprise
Estimated Growth Rate / 60 – 75 / As above / Urban Enterprise

Source: City of Greater Geelong – St Leonards Structure Plans 2006 and 2014, G21 Land Supply Monitor, ABS Census.

Demand for Holiday Homes

St Leonards has a very low dwelling occupancy rate of 41% (2011 Census), which is significantly lower than other towns on the Bellarine Peninsula as shown in Table 4. This reflects the strong presence of the holiday home sector in St Leonards and dwellings which are constructed and made available for holiday letting, as well as and the different housing market segments which operate across the Bellarine Peninsula.
This also demonstrates the difficulty in applying a regional approach to land supply, given that towns such as Drysdale, Leopold and Ocean Grove, whilst proximate to St Leonards, are primarily locations for permanent residents as opposed to holiday homes. I elaborate further on this issue later in my evidence.

TABLE 4Dwelling occupancy rates, 2011

State Suburb / Dwelling Occupancy, 2011
St Leonards / 41%
Drysdale / 89%
Portarlington / 57%
Leopold / 91%
Ocean Grove / 71%
Greater Geelong (LGA) / 87%
Victoria / 89%

Source: ABS Census 2011.

I consider that future demand for holiday homes in this area will be driven primarily by residents of Melbourne, particularly from the western and northern suburbs, given the convenient travel times from these areas (utilising CityLink and the Western Ring Road) and recent infrastructure improvements such as the Geelong Ring Road. Population growth in these areas is projected to increase significantly over the period to 2031, at an average rate of between 2.2% per annum (Northern Melbourne sub-region) and 2.5% per annum (Western Melbourne sub-region). (Victoria in Future 2014 and Plan Melbourne).
I also note that St Leonards is a popular fishing and boating location, due primarily to the excellent boating access to Port Phillip Bay provided at the Bluff Road Boat Ramp. I understand from discussions with the Sea Change Estate developer that the strongest demand for lots in that estate was from buyers who required sufficient space on the lot to accommodate a boat (generally requiring a lot in excess of 700m2), further demonstrating the importance of the holiday home and holiday rental markets.
The boat ramp in St Leonards contains ample parking and is a 4-lane concreted ramp, the largest public access ramp in the area (along with Point Richards in Portarlington).[1].
In my opinion, the consistently low rate of dwelling occupancy in St Leonards, the attractiveness of the town for fishing and boating, and strong long term population growth in the north and west of Melbourne will sustain demand for holiday homes in the Bellarine Peninsula in general, and underpin the ongoing demand for holiday homes and holiday accommodation in St Leonards.

Land requirements

I have estimated total theoretical supply of residential land at 537 lots as at 2014.I reiterate my previous comments about this being a theoretical maximum supply given the factors previously outlined, and that a 20% discount on vacant lots to reflect uncertainties regarding the availability of these lots reduces the overall supply to 479 lots.
Using a demand range of 60 to 75 dwellings per annum, the maximum amount of residential land supply currently available in St Leonards is estimated to be between 6.4 and 9 years, as shown in Table 5.
It is important to note that there will be significant lag time before new lots in the Growth Areas would be made available to the market. Any further residential supply would require completion of Amendment C312, completion of a further Planning Scheme Amendment to rezone the land, planning permit approval for subdivision, and construction and sale of residential lots before dwellings can be constructed.
I consider that this process is likely to take at least 3 years, by which time the available supply in St Leonards would be reduced to 3.4 – 6 years. In my opinion, this is a critically low level which would likely cause property prices to increase and place an artificial restriction on demand from permanent residents and holiday home owners.
The SPPF requires Councils to plan for at least 15 years of land supply for urban uses. Hence, I consider that rezoning additional residential land in St Leonards is needed immediately.
If the Growth Area land is rezoned and developed in 3 years, I estimate that the total supply would equate to 22-29 years at that time.

TABLE 5land supply assessment summary