The latest HIA-RP Data Residential Land Report provided by the Housing Industry Association, and CoreLogic RP Data, show that acute supply bottlenecks are affecting Australia’s residential land market.
“During the September 2014 quarter, the number of land market transactions fell, while price growth accelerated,” commented HIA Senior Economist, Shane Garrett. “These are the classic hallmarks of a market which is fast running into supply problems.”
“Turnover in the national land market declined by some 16.7 per cent during the September 2014 quarter. At the same time, price growth accelerated to 3.3 per cent over the quarter. There are clearly pressures building in terms of new residential land supply,” Shane Garrett explained.
“It is important that land supply policy across Australia is consistent with the goal of housing affordability. The process of delivering new land supply and the requisite infrastructure for new housing is currently too slow and too expensive. It appears that shovel-ready residential land is starting to dry up against the backdrop of record new home building activity. Policymakers have to intervene in order to allow for Australia’s long term housing needs to be met,” Shane Garrett noted.
During the September 2014 quarter the weighted median price of residential land rose by 3.3 per cent to $212,727 per lot. This represents an all-time high for land prices nationally. Capital city land prices saw growth of 4.7 per cent during the quarter, and were
10.0 per cent higher than twelve months earlier, however some of this was due to an increase in the size of land lots transacted. In regional Australia, land prices rose by 0.7 per cent during the quarter and were 3.5 per cent higher compared with a year earlier.
Land prices reached an all-time high in both the capital city and regional markets.
According to RP Data research director, Tim Lawless the increase in land prices is a concerning development particularly given that dwelling approvals and construction are currently at record high levels.
“Dwelling commencements are currently at a record high and the Reserve Bank has previously highlighted that their hope is to extend this current period of heightened construction over a number of years.
Given that land sales have been trending lower since the June 2013 quarter, it does not bode well for this period of heightened construction to come to fruition,” Mr Lawless said. Mr Lawless added, “The vacant land which is being sold is selling for an increasingly expensive price, remember that it is the high cost of vacant land which significantly contributes to the increasing cost of housing.
Ideally we should be seeing more land bought to the market and sold during this period of low borrowing costs. This would help to curtail the increases in the cost of this vacant land.”