Demand for residential land has surged as buyers snap up lots in order to capitalise on the Commonwealth HomeBuilder program, the latest report shows.
Releasing the latest edition of their Residential Land Report, Housing Industry Association (HIA) and CoreLogic say that the number of vacant residential lots sold throughout Australia jumped by 27.7 percent during the September quarter and was 62.7 percent higher compared to its level at the same time last year.
Regional areas benefited most, with land sales increasing by 56.2 percent during the quarter.
In several markets, volumes stood at their highest level for the past ten years.
These include regional Victoria, Brisbane, regional Queensland, Adelaide and regional South Australia.
The latest report indicates that demand for land is growing in response to an upturn in the market for new home building which followed the announcement of HomeBuilder last June.
Moreover, whilst the report covers up until the September quarter, land market conditions appear to have strengthened further in the December quarter as buyers rushed to capitalise on HomeBuilder prior to the program’s original expiry date on December 31 (that date has since been extended until March).
During the December quarter, housing finance data from the Australian Bureau of Statistics indicates that the number of loans made to owner occupiers for the purchase of vacant residential land rose by 13 percent from the September quarter and was up by 86 percent compared to the December quarter in 2019.
In their report, HIA and CoreLogic noted several factors behind the rise in demand in regional areas specifically.
As well as the boost from HomeBuilder, these include a newfound ability to work from home and to look at locations previously considered too far from work, fewer employment opportunities in capital cities throughout 2020 and an ongoing trend toward ‘sea and tree changes’.
Whilst the volume of land sales increased during the September quarter, the price of land fell by 1.5 percent over the quarter.
This, HIA and CoreLogic say, likely represents a time lag which results from the timing difference between when contracts are signed and when settlement occurs – a period which can last for several months as settlement cannot occur until land is titled.
HIA Economist Angela Lillicrap said that whilst HomeBuilder was the catalyst for greater housing market confidence, the market has also been aided by low interest rates along with an easing in lending practices.
She said the strength of showing in new home sales and building approval data indicates that demand for vacant land should remain strong into 2021.
Lillicrap says land prices may increase in response to the surge in demand as the decade plus long process to get land shovel-ready means that any surge in demand is unlikely to be matched by any increase in short term supply.
Eliza Owen, CoreLogic’s Head of Residential Research, said the surge in demand has been driven by government housing stimulus including HomeBuilder, temporary changes to stamp duty across NSW and the extension of the first home loan deposit scheme announced in the October budget.
She added that demand surge also reflected a shift in housing demand toward regional Australia and the periphery of major cities – a phenomenon which is underscored by an 8.4 percent rise in approval data over the year to November in detached houses but a decline in approvals for multi-unit dwellings.
Nevertheless, Owen says pressure on vacant land will ease as new housing demand tapers off after HomeBuilder ends in March.