The supply of vacant residential land across Australian cities and suburbs is running desperately low as record demand for detached house construction has seen inventory of shovel-ready lots reduced to weeks in some cities, a new report has found.

The Urban Development Institute of Australia (UDIA) has released its flagship ‘State of the Land’ report prepared with input from real-estate information services firm CoreLogic and greenfield land market research firm Research4.

According to the report, the number of vacant residential lots which were sold across capital cities surged by 33 percent from already elevated levels in 2020 to reach a record 76,100 in 2021.

Leading the way was Melbourne, where sales volumes surged by 125 percent.

Sales were also strong in Adelaide (up 40 percent) and South-East Queensland (up 31 percent).

Whilst volumes have been more subdued in Sydney, this reflects low inventories of available stock rather than any change in demand.

Whilst the increase in sales has been mostly offset by new land releases, the surge in activity has left stocks of available land at alarmingly low levels.

Whereas historically, three to five months’ worth of trading is considered ideal, the supply of shovel-ready land in Brisbane/SE Queensland, Sydney and Melbourne sits at only weeks.

Meanwhile, inventory sits at just over one month in Adelaide and a more-healthy three months in Perth.

Not surprisingly, this is pushing up prices.

On a square meter basis, the price of greenfield land rose by 10 percent across all capital cities last year – with Sydney recording an increase of 17 percent.

Across Australia, demand for residential land has been driven by massive levels of activity in detached home building.

At 148,819, the seasonally adjusted number of detached homes which were approved for construction during calendar 2021 was the highest on record and was 42.5 percent higher compared with the pre-COVID levels of 104,488 in calendar 2019.

Largely speaking, demand for detached homes has been driven by the Commonwealth HomeBuilder grant, low interest rates and a shift in preference toward lower density housing on account of the pandemic.

UDIA National President Maxwell Shifman says the results underscore the need for action to ensure that sufficient volumes of development-ready land are brought online to meet demand.

Should this not happen, land supply pressures will place upward pressure on housing affordability.

“The frenetic performance of the national greenfield sector has been a critical component of Australia’s strong economic performance through the pandemic,” Shifman said.

“While this has been great news for market confidence and strengthened a housing-led economic recovery, it is also a warning for Governments for the need to act now to ensure development-ready supply is brought online.

“Failing to do so, and quickly, will impede the economic recovery and further impact housing affordability.”

Colin Keane, Director at Research 4, says affordability will be impacted if 2022 activity levels are anything like those in 2021.

“2021 was an all-out assault on the Greenfield supply lines with most markets ending the year with the depleted levels of Active Supply,” Keane said.

“If 2022 is a continuation of 2021 in terms of activity levels, then the impact will be a widespread loss of housing affordability. 2022 will need to see a moderation in demand in order to allow the market to re-group and re-stock.”

Whilst the detached home sector is booming, however, the report found that activity remains subdued in multi-residential housing, with the forward pipeline of new multi-unit supply across capital cities declined by ten percent across 2021.

However, Shifman says demand for apartments will improve as immigration returns, cities begin to live with COVID as endemic and a desire for greater access to services begins to r-emerge.