Land Supply Shortages are Shutting Out Home Buyers 1

Wednesday, July 22nd, 2015
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The March 2015 quarter report shows price growth accelerating as turnover falls sharply.

“This is not a good combination – escalating residential land values and a related decline in sales volumes,” said HIA Chief Economist, Harley Dale.

“The upcycle in detached and low density housing construction has been strong, without being stellar. The combination of significantly reduced turnover and strong price growth suggests that supply bottlenecks in residential land are intensifying. That is pricing new home buyers out of the housing market and capping the construction cycle at a lower level than would otherwise be the case.”

“The provision of adequate, affordable, shovel-ready land is a crucial element to addressing housing affordability pressures across the residential property market,” said Harley Dale. “More needs to be done to expedite supply in 2015/16. Removing the obstacles to affordable land supply is a core requirement of a successful taxation and federalism white paper reform process.”

During the March 2015 quarter, the residential land price in Australia increased by 4.1 per cent compared with the previous quarter. This represented an increase of 8.2 per cent compared to the same quarter of last year. During the March 2015 quarter, residential land transactions fell by 5.2 per cent compared with the previous quarter to be 17.6 per cent lower than the same period 12 months earlier. The March 2015 quarter represents the third consecutive decline in land transactions in Australia.

According to CoreLogic RP Data research director, Tim Lawless, the trend towards fewer land sales has been evident since mid-2013 and is visible across each of the capital city vacant land markets.

“The number of vacant land sales peaked over the June 2013 quarter and have since reduced by almost 30 per cent. To see the price of land consistently rising over the same time frame suggests low supply is the main driver of this price growth rather than a slowdown in demand.”

“Higher land prices translate to more expensive housing which is an unfortunate circumstance for those looking to purchase a detached house. Sydney stands out as the most expensive land market with a rate per square metre of $678, followed closely by Perth with a rate per square metre of $664.”

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  1. David Chandler

    Harley, the supply of new green fields land is not infinite.The reality is that the cost of servicing and getting to more remote fringes of our cities is unsustainable. By 2030 Australia may not need to build any more detached dwellings. The great Australian dream of detached home ownership is under threat. Just look at the number of under 35 year old renters and the swelling numbers of Australians over 60 who are still wrestling with mortgages as they approach retirement.
    Like it or not more and more households will be renters. Others will lower their expectations and opt for smaller multi-unit housing closer to jobs and social networks. There will be a time when industry will need to come to terms with a 30% reduction in the number of detached dwellings and unfortunately the need for 30% of the housing industry to redefine their housing construction futures. I believe this is an opportunistic time for the industry to embrace multi-unit and for those who can see this coming to get ahead of the pack. No good getting tangled up in the last group hug to fight for more green field land and record low interest rates. Better to see the future and get a plan to be part of it.