In a positive sign for the housing construction sector, sales of vacant residential land throughout Australia continue to rise, the latest data shows.

However, cost pressures in the sector could also increase as land prices appear to be back on the rise.

On a seasonally adjusted basis, the number of vacant blocks of residential land sold throughout the country increased by 4.3 per cent in the March quarter, according to the latest HIA-rpdata Residential Land Report published by the Housing Industry Association in conjunction with property information analytics provider RP Data.

Almost 15,000 vacant lots were sold during the quarter, and sales have now risen during seven out of the last nine quarters.

residential land sales

Still, Housing Industry Association chief economist Harley Dale cautions any upward momentum implied by the figures remains modest in scale and that signs of clear improvement are limited to New South Wales and Western Australia.

“The March quarter update signals we are moving in the right direction, but as a key leading indicator, land sales suggest the magnitude of a first stage new home building recovery will fall short of what the economy requires,” Dale says.

Of greater concern to builders, prices of land appear to be back on the rise, a phenomenon which if sustained will see upward pressure on construction costs.

Driven by a 3.2 per cent increase in capital cities, median prices for lots sold throughout Australia rose 2.5 per cent to come in at $198,512 during the quarter – albeit with prices being up only 2.4 per cent year-on-year.

With a median value of $266,000, the Sunshine Coast remains the most expensive regional market in which to purchase land, while East Gippsland in Victoria is the cheapest.

expensive regional markets

RP Data research director Tim Lawless says the increase in sales is in line with improving trends throughout the second half of 2012 and early 2013 and provides a clear indication that recent monetary policy loosening and moves to direct home buyer incentives specifically at new construction is having an impact.

He warns, however, that affordability constraints may limit the extent of recovery, particularly in capital city markets.

Dale says ‘record high’ prices for land – especially in Sydney and Perth – are a significant concern, and has called on the government to undertake taxation and planning reforms to improve affordability of vacant land.