Sales of vacant residential land have plummeted to record lows amid further signs of a deterioration in the market for new residential construction, the latest data shows.
Released by Housing Industry Association and CoreLogic, the March Quarter edition of the Residential Land Report indicated that the number of sales of vacant residential lots which took place throughout Australia plummeted during the March quarter to reach 7,236.
This represents the lowest level of vacant land sale volumes on record and is down on the average quarterly figure over the last decade of 13,682 by close to 50 percent.
Sales are weak across most states and territories, and are particularly subdued in NSW, Victoria, Queensland and Western Australia.
In Sydney, March quarter sales now sit at below 500 and are less than a fifth of levels seen four years ago in the March quarter of 2015.
In Melbourne, sales are barely a quarter of their level three years ago.
Land prices, meanwhile, have stabilised after several years of acceleration.
At $316,279, the weighted median price of land across Australia’s six state capitals edged up 0.8 percent over the quarter but was down by 0.2 percent year-on-year.
Compared with their level five years ago, land prices have risen by 37 percent.
According to the report, the decline in sales volumes is a result of tighter credit conditions toward the latter part of 2018 and a decline in confidence associated with falling house prices.
For home builders, the latest data augurs poorly for near-term prospects.
In its latest forecasts, BIS Oxford Economics says a combination of low levels of land sales in greenfield markets along with subdued presales volumes for multi-story units have ‘baked in’ a further decline in dwelling starts for 2019/20.
HIA Chief Economist Tim Reardon expressed concern that a shortage of land could exacerbate housing affordability challenges.
“A shortage of land is one of the factors that have driven home prices to increase over the past decade,” Reardon said.
“An adequate supply of land is required to avoid a deterioration in affordability.”
CoreLogic Research Director Tim Lawless agrees.
The trend toward lower volumes of vacant land turnover at a time of strong population growth underscores a need for better planning and land release strategies which run parallel with a strategic infrastructure plan, he says.
Lawless says land prices could rise again over the second half of 2019 as housing credit and prices stabilise and interest rates head potentially lower.