Why Geelong's homes isn't target stacking up
Geelong's lofty target to deliver nearly 130,000 new homes by 2051 is doomed to fail unless something gives to make building apartments stack up better.
An Urban Development Institute of Australia study revealed 15 projects where high density permits approved in Geelong's CBD have not yet progressed.
The report detailed a $200,000 gap between the median price apartments are selling for in Geelong and the minimum price per new apartment to remain viable in an eight-storey building as construction costs escalate.
The residential and mixed use approved developments include landmark projects from Gurner and Monno, a large scale built-to-rent development and the region's first vertical retirement village.
Other properties have been put up for sale, such as a 14-level residential and office tower at 118 Corio St.
The only major residential projects under way are an 11-storey social housing tower and the seven-storey Motif apartment complex near to the Latrobe Terrace flyover.
The report, Making it Stack: Infill Feasibility in Regional Victoria, highlights the need to accelerate infill development in Geelong to meet housing goals but paints a grim picture around escalating construction costs.
The report identifies key challenges such as inflexible planning frameworks and high costs, recommending greater planning flexibility, feasibility testing and incentives to support viable infill housing development, especially if they are to provide affordable housing options.
Apartments and townhouses are supposed play a significant role in driving 60 per cent of the new homes in Geelong by 2050 by unlocking infill sites within existing urban boundaries.
But only 20 per cent of all new dwellings are being delivered through infill areas.
The cost to build apartments is typically twice the rate per square metre than houses, with interest rates, construction and labour costs, developer contributions and mandated affordable housing provisions also hurting viability.
Rigid planning rules means decision-making doesn't consider feasibility alongside factors such as heritage, height and density; while urban design frameworks often set height limits below a level deemed viable for development, the study found.
The research paper recommendations include allowing greater flexibility in planning rules, testing feasibility before finalising planning frameworks, updating outdated planning schemes, and trialling incentives in key precincts to support infill housing.
UDIA Geelong committee chairman Nick Clements said the price point new apartments need to hit to remain viable is the biggest issue that faces building in Geelong.
'You would have to sell an apartment for greater than what a house and land package can be obtained in Gen Fyansford estate, or in Highton,' he said.
Fyansford is Geelong's most expensive greenfields market.
'We really need the prices of established homes in Geelong to substantially increase before there can be a greater attractiveness for people to purchase smaller, medium density and apartment stock,' Mr Clements said.
'Interest rates haven't helped, with home prices depreciating in Geelong over the past couple
of years.'
The median price for existing apartments was $621,000, the study revealed, but the minimum feasible cost to sell a new apartment in Geelong was between $805,000 and $819,000.
Mr Clements said the big wages on state government infrastructure projects in Melbourne was creating a local skills shortage in key trades causing labour costs to grow exponentially, while materials costs have stabilised at around 30 per cent above pre-covid levels.
Hygge Property director Adam Davidson said a cost-revenue analysis revealed seven storeys was the minimum needed to feasibly build apartments in Geelong, but that would require planners showing more discretion around height or density, if more infill development was to get off the ground.
'It's easy for councils to set frameworks encouraging three to five level development because most people relate to the street level of projects,' Mr Davidson said.
'Unfortunately, because we sell apartments for less in the regions the math shows it's very difficult to deliver apartments at less than six levels in a regional context.'
Mr Clements, who is senior principal town planner for Tract Consulting in Geelong, said the number of approved developments shows there's an appetite to build, but the current financial conditions don't allow it.
'The state government has made it very clear they want to see more housing in the CBD,' he said.
'The market is saying we'd love to build it, but we can't make it stack up.'
Mr Clements said suburban areas, such as Pakington St North, faced the same issues.
'There's a permit for a site next to the Petrel Hotel that's a perfect example. A building was demolished because there was a permit granted for a multi-level residential and retail outcome, but it hasn't been acted upon because no-one can make it financially viable.'
Mr Clements said the government had provided approval pathways bypassing councils for certain projects, but costs remained the overarching problem.
'In the suburbs we still see councillors overturn recommendations from the officers, but they're dealing with 20 dwellings here, 20 dwellings there. They're really a drop in the ocean.'
Developers rely on financiers for the vast majority of projects, who assess risk based upon whether a proposal can reach certain financial milestones.
'There's very few developers that you can say are very brave to pull the trigger on various projects and they've got very good relationships with lenders that allow them to be quite bold,' Mr Clements said.
City of Greater Geelong executive director placemaking Tennille Bradley said the City was continually in discussion with developers to consider how it can facilitate new apartments and mixed-use development in the CBD.
Facilitating development was the primary discussion in a CBD revitalisation forum in March, Ms Bradley said.
'Many of the comments coming from the industry expressed the need for financial intervention, including property related tax consideration, to increase feasibility for development in central Geelong, in addition to possible changes to the planning controls,' she said.
The Central Geelong Framework Plan (CGFP) has a goal of 16,000 new residents in central Geelong by 2050.
'Pipelines for apartments and townhouses in central Geelong are incredibly important for the growth and vibrancy of our city, and to help us achieve the housing targets given to us by the state government,' Ms Bradley said.
The state government is responsible for planning decisions in the CGFP area and for all developments that are five storeys and above, Ms Bradley said.
'The City recognises that the heights in the CGFP are discretionary and many of the approved projects exceed the recommended heights in the plan for various reasons, one of which being to ensure feasibility.'
Ms Bradley said the City continues to advocate for good development outcomes in central Geelong.
'High quality projects that provide high amenity to the community and adequately integrate with the streetscape to ensure an attractive, liveable and vibrant city centre are important to Council, central Geelong residents, the Greater Geelong community and developers,' she said.
'The Mayor continues to advocate for better economic frameworks for central Geelong developers to make sure that approved projects can progress and contribute to additional housing in Geelong.'
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