The price of vacant residential land across Australia has hit a new high, the latest data suggests.

Published by Housing Industry Association in association with CoreLogic, the September quarter edition of the Residential Land Report provides updated information and land sales activity in 52 housing markets across Australia including the six capital cities.

According to the report, the median prices of vacant residential land that was sold across Australia surged by 4.5 percent in the September quarter to reach $366,510.

This represents the highest price on record and a 7.6 percent year-on-year increase compared with the September quarter in 2023.

Stripping out the impact of changing lot sizes, median prices on a square meter basis rose by 1.7 percent during the September quarter and by 9.3 percent year-on-year.

Leading the way are capital city markets, where median prices surged by 6.8 percent over the quarter and have increased by 9.2 percent year-on-year to reach $408,160.

Leading the way in particular are Perth and Brisbane, where prices have increased by 23.5 percent and 8.4 percent over the quarter and by 38.6 percent and 21.2 percent over the year to September.

Elsewhere, prices have increased over the past year in Adelaide and Sydney by 9.2 percent and 7.2 percent but have contracted in Melbourne by 4.2 percent.

According to the report, the divergence in performance across locations over recent years been driven by a shift in interstate and intercity migration patterns.

This has seen some residents move away from Sydney and Melbourne and toward Perth, Brisbane and Adelaide to capitalise on employment opportunities and more affordable housing.

Similar trends have also driven the ongoing popularity of cities such as Illawarra, Newcastle, Lake Macquarie, the Hunter Region and Geelong. In these cities, the report says that lot sales have increased as home buyers seek more affordable opportunities outside of Sydney and Melbourne.

The increase in prices came as the seasonally adjusted number of vacant residential lots that were sold throughout the country plummeted by 20.3 percent during the quarter to reach just 9,364.

At this level, quarterly sales volumes are near their lowest point over the past five years (see chart).

The combination of strong price increases and low sales volumes is likely to indicate a shortage in the availability of land which is ready for development.

The latest report underscores concerns that the cost and availability of shovel-ready land will emerge as a constraint to new greenfield housing development in the near term.

This is especially the case as the shortages and price increases are occurring when levels of detached home building remain relatively low compared with historic standards and are well below levels that are required in order to meet the national housing target of delivering 1.2 million new home completions over the five years from 1 July 2024.

Should these constraints remain unaddressed, the nation will need to reply upon multi-residential housing forms (units, townhouses, apartments etc.) in order to deliver upon the aforementioned target.

HIA Economist Maurice Tapang said that the increase in land prices was concerning.

“Land prices have risen by more than double the rate of growth in the ABS Consumer Price Index (CPI) and five times faster than growth in the cost of home building materials, as measured by the Producer Price Index (PPI) over the same period …” Tapping said.

“… Ongoing inadequate supply of land for residential development, both greenfield and infill, continues to act as a key constraint on housing supply and risks torpedoing the Government’s ambition to build 1.2 million homes over the next five years.

“Increased urgency and commitment from governments to release more land for residential development and adequately service it with essential infrastructure will alleviate rising land prices and help more Australians into homeownership.”

CoreLogic Economist Kaytlin Ezzy said that the cost of land continues to be a challenge in new housing delivery.

“(Land) Affordability continues to be a major hurdle in bringing new housing stock online,” Ezzy said.

“The continued uptick in land prices, coupled with upward pressure on construction costs and the higher for longer interest rate environment, has moved new home ownership further out of reach for some Australians.”