Land for new homes is not keeping pace with demand and, as a consequence, prices will increase further, new research predicts.
The HIA-CoreLogic Residential Land Report shows that over the year to September 2021, the median price of land in Australia rose by 12.6%. This is the strongest annual increase since 2006.
The median price of land in the combined capital cities increased by 14.7% over the year to September 2021 compared to an increase of 8.6% in the combined regional areas.
Housing Industry Association Economist Angela Lillicrap noted that in Greater Sydney alone, the median price of residential land increased by 32.2% over the year to September 2021.
“This suggests that the shortage of residential land is more severe in the capital cities”, Lillicrap said, adding that land will be the biggest constraint on building activity over the next couple of years.
“The current shortage of land will impact the industry at a time when the broader economy needs construction to help pull it forward.”
According to CoreLogic’s Head of Research Tim Lawless, the surge in land prices over the quarter is hardly a surprise, considering the record level of detached house approvals at the peak of HomeBuilder together with constraints involved with bringing newly subdivided land online quickly.
“What is more counter-intuitive is the trend towards fewer land sales through 2021, a pattern that is evident across each of the state capitals despite strong demand”, Lawless said.
“Softer volumes are more a reflection of short supply rather than a lack of demand, which helps to explain the sharp rise in land values at a time when the volume of land sales is reducing”, he concluded.