The Impact of Land Supply on Housing Affordability in the Perth Metropolitan Region

Abstract

A number of commentators and policy makers believe that a potential solution to housing affordability is available through large scale release of newly subdivided land on the urban periphery. The argument follows that releasing more land increases supply and, through market forces, leads to lower new land and house prices. This will, in turn, lead to improved affordability within the stock of existing houses. Despite this view, there has been very little empirical research investigating how large scale land release on the urban fringe actually affects housing affordability. This question has important implications for both planning policy and affordability within local housing markets, but also within the wider aggregate urban housing market. This paper explores this issue by quantifying land release in a number of Perth (Western Australia) Metropolitan suburbs and comparing the extent of land release with changes in land and house prices. Our analysis indicates only a weak relationship between land supply and rates of house price growth, concluding that the drivers of housing affordability are far more complex than the single issue of land release.