The volume of residential land sales increased 18.2% in the second quarter of 2013, the highest quarterly volume since the first quarter of 2010, according to figures from the Housing Industry Association and RP Data.
HIA chief economist, Harley Dale, said that is marked a recovery in residential land sales which is impressive but he pointed out that the growth is coming from a very low base.
The HIA-RP Data residential land report also indicates that there will be further upward momentum in the detached house construction market for the rest of 2013 and into 2014.
‘There is a close (lagged) relationship between RP Data-HIA land sales and the number of detached house starts. Land sales volumes highlight the prospect of further growth in detached house starts in 2013/2014 following a modest lift of 3.7% in 2012/2013,’ explained Dale.
‘That would be a very positive outcome for both the new home sector and the wider economy,’ he said, adding that sales are now back to a level equivalent to the global financial crisis trough but the level is still 21% below the historical average.
‘Obviously it will be important to see further strong momentum in land sales for some time to come. For that to occur there needs to be a keener policy focus on ensuring adequate and affordable shovel ready land is available,’ he pointed out.
‘In terms of residential land prices, growth has generally been modest. A flat June 2013 quarter for the weighted median residential land value saw an increase of only 1.7% over the year, less than general inflation,’ added Harley Dale.
According to RP Data’s research director Tim Lawless, the improved vacant land market conditions are in line with the improvements across the broader housing market. ‘The housing market has been back in growth since the middle of 2012 with both the rate of capital gains and transaction volumes gathering some momentum during 2013,’ he said.
He pointed out that it should come as no surprise that the Sydney housing market, which remains well undersupplied relative to the rate of population growth and is recording the highest rate of capital gain currently, is one of the primary drivers behind the lift in national vacant land sales.
According to the data, the number of land sales across Sydney was 33% higher over the year to the June quarter to reach an 11 year high. ‘While Sydney has posted a solid improvement in land sales, we are also seeing a substantial increase in the number of blocks sold in Melbourne, Brisbane and Adelaide over the June quarter,’ Lawless said.
‘The improved number of land sales reflects a higher level of buyer demand, but we need to keep in mind that the figures are moving higher from a low base and we are continuing to record a substantially lower number of land sales than what was recorded during the last growth phase back in 2009/2010,’ he explained.
‘Nevertheless, policy makers such as the Royal Bank of Australia should see the stronger housing market conditions as reinforcement to the current policy settings; not just low interest rates but also the incentives available to purchase or build a new home rather than an established one,’ he added.
In the June 2013 quarter the weighted median residential land value for Australia’s six state capitals increased by 0.2% to $219,863. This was 2.4% higher when compared to the same period in 2012. The median value for regional Australia was $153,710, a quarterly decline of 1% and a 0.1% annual reduction.
