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Does land banking push up housing prices?

As housing prices soar once again, pushing rents higher and affordability beyond the reach of aspiring first-time buyers, it’s not clear whether land-banking by developers holds back supply and pushes up prices, the National Housing Finance and Investment Corporation says.

Definitions of the term “land banking” vary – it is also used for loss-making personal investment schemes that have drawn small investors – but in commercial property it often refers to the practice by developers of staging the releases of parcels of land to maximise profit.

The practice of staging land releases in master-planned communities reflected an understanding by developers of market conditions and pricing their product in line with market standards, said Brian Haratsis, a consultant who works with many developers.

“If you understand your competitors and that they have not got much land left, you’ll reduce your supply and wait for them to finish and jack your price up,” Mr Haratsis said.

But this had little effect on market pricing, and the slow release of land zoned for development into the market was the bigger issue, he said.

“Staging is small beer,” Mr Haratsis said. “The rezoning issue is what it’s all about. You have to bring more land in total on the market.”

Read the full article her – Australian Financial Review Article



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