The price of vacant residential land in Australia has hit new record highs, the latest data shows.

And the volume of land sold remains at subdued levels, indicating that the price increase is being driven by a shortage of supply.

In the June quarter edition of their HIA-CoreLogic Residential Land Report, the Housing Industry Association (HIA) and CoreLogic have provided updated information on land sales activity in respect of 52 housing markets across Australia including the six state capital cities.

According to the report, the median price of vacant residential lots that were sold across the nation rose by 2.2 percent over the June quarter to reach a new record high $351,044.

The happened as regional land prices rose by 2.8 percent whilst capital city prices increased by 2.0 percent.

Across 2023/24, prices increased by 6.0 percent – with prices up by 6.9 percent in capital markets and by a more modest 2.4 percent in regional areas.

Meanwhile, sales volumes declined by 1.4 percent and are at some of their lowest levels seen this century.

The combination of rising prices and low volumes suggests that there is a shortage of ‘shovel ready’ land that is ready to be sold to the market for new detached housing.

Serious Housing Challenges

The current land shortages implied by the latest data highlight challenges in delivering upon the national housing target of 1.2 million homes over the five years from1 July 2024.

To meet these targets, the nation would need to deliver an average of 240,000 dwelling completions each year.

In 2023/24, however, only just over 176,000 dwellings were completed.

With shortages of land appearing to be evident at this level of completions, it appears that land supply will act as a significant constraint to new housing delivery in greenfield areas.

This suggests that achievement of the aforementioned targets will require a significant increase in construction of multi-unit housing typologies such as units, townhouses and apartments.

Meanwhile, longer term increases in land prices highlight ongoing challenges in affordable housing delivery.

Ten years ago in the June quarter of 2014, the price of vacant residential lots in Sydney, Melbourne and Brisbane stood at $307,000, $210,000 and $214,000 respectively.

Now, land prices in these capitals stand at $672,000, $390,000 and $370,000.

This means that cost of delivering new single detached homes in these capitals is extremely high even before construction starts or a shovel is placed into the ground.

As with the land supply constraints issue referred to above, these current land prices suggest that it is becoming increasingly difficult to deliver affordable housing in the single detached housing segment in greenfield areas.

As a result, a significant increase in multi-unit construction will be needed in order to address affordable housing challenges.

Perth Leads the Way on Prices

In terms of locations, Perth is leading the way in terms of price increases.

This has happened as Western Australia has been the first state to witness a recovery in new home-building activity.

All up, prices in the Western Australian capital have increased by 5.3 percent over the quarter and by 17.2 percent over the year.

Unlike other capitals (see below) Perth has also seen extremely strong volumes of sales activity over the past year.

This suggests that the momentum in WA’s housing market has seen Perth emerge as the national hotspot of land sales and purchasing activity.

Elsewhere, quarterly prices also rose in Sydney (+1.7 percent), Melbourne (+2.4 percent), Brisbane (+2.2 percent) and Hobart (+8.1 percent) but contracted by 5.1 percent in Adelaide following significant increase during previous quarters in the South Australian capital.

Across 2023/24, prices increased in Sydney (+8.9 percent), Brisbane (+15.1 percent), Adelaide (+13.0 percent) and Hobart (+10.2 percent) but contracted by 0.6 percent in Melbourne.

Unlike the case in Perth however, strong price growth in other capitals has coincided with low sales volumes.

This suggesting that an underlying shortage of shovel-ready land may be evident in these markets.

In Sydney and Melbourne, land sales volumes in the June quarter stood at about half and one-third of decade averages respectively.

In Brisbane and Adelaide, meanwhile, volumes remain at modest levels by historic standards.

Action Needed

According to HIA and CoreLogic, action is needed to ensure that a sufficient volume of land is available to be sold to the market and developed when needed in order to meet new housing requirements.

Speaking about the implied shortages referred to above, Housing Industry Association Senior Economist Tom Devitt called on governments to ensure that sufficient volumes of land are available.

“This points to the need to ensure a solid pipeline of shovel-ready land, especially as confidence returns to these markets,” Devitt said.

“Policymakers must work to reduce constraints and costs on new home building. This includes measures as set out in the HIA Planning Blueprint consisting of accelerating planning processes and approval times to facilitate increased infill development as well as speeding up the release of greenfield land and increased funding for critical enabling infrastructure to make projects shovel-ready faster.

“Meeting government housing targets and improving housing affordability requires a significant boost to home building. Increasing land costs and uncertainties on industry and households will have the opposite effect.”

CoreLogic Economist Kaytlin Ezzy said that more land is needed in order to meet housing targets.

“The record high median land prices recorded in the June quarter amid below average sales continues to point towards an ongoing undersupply of land hampering the addition of new housing stock,” Ezzy said.

“Over the year to June, approximately 176,000 homes were completed nationally. While up by 1.2 per cent year-on-year, this was 8.4 per cent below the decade average and 26.6 per cent below the 240,000 a year needed to meet the Government’s five-year housing target.

“Without a steady flow of shovel-ready land, it’s likely land prices will continue to trend upwards, and dwelling approvals and completions will continue to fall short of target.”

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