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Residential building land prices rise in Australia

The number of residential land sales fell by 11.8% over the year to the December 2014 quarter while in contrast, the weighted median residential land value increased by 2.8% and was up by 6.3% over the year.

The data from the latest HIA-CoreLogic RP Data Residential Land Report provided by the Housing Industry Association, also shows that the increase in the weighted median value was driven primarily by Sydney, with significant growth also evident in Perth and Melbourne.

‘As with all aspects of this housing cycle, there are wide divergences in land market conditions around the country this is clearly evident across the six capital cities and 41 regional areas covered in the report,’ said HIA chief economist Harley Dale.

‘There is insufficient shovel-ready land in some markets and this is placing undue upward pressure on residential land values. Construction of detached houses looks to be peaking for the cycle, but there is unrealised demand out there because of that lack of readily available and affordable land,’ he explained.

Overall the price of residential land per square metre increased in Sydney, Melbourne and Perth in the December 2014 quarter, with Sydney remaining the country’s most expensive land market by some margin.

Across regional Australia, the most expensive residential land markets are the Gold Coast and the Sunshine Coast in Queensland, and the Richmond-Tweed region in New South Wales. The least expensive markets can be found in the South East region of South Australia, and the Mersey-Lyell and Southern regions of Tasmania.
According to CoreLogic RP Data research director, Tim Lawless, the number of vacant residential land sales has been trending lower since the middle of 2013 and concurrently, median land prices have been rising to new record highs.

‘The opposing trends are a clear sign that demand is outweighing supply which is pushing land prices higher. Higher land prices ultimately lead to less affordable homes. It is the high cost of vacant land which significantly contributes to the increasing cost of housing. Ideally we should be seeing more land brought to the market and sold during this period of low borrowing costs,’ he added.

Meanwhile, the latest Australian Bureau of Statistics housing finance figures show that the number of loans to owner occupiers (excluding refinancing) declined modestly in February  although the number of loans to those purchasing and building new homes increased slightly.
The number of loans to households building or purchasing new homes increased by 2% in February, a relatively positive result against a backdrop where lending to households purchasing existing homes eased back modestly.

The number of loans to owner occupiers buying established homes, excluding refinancing, fell by 0.9% in February to a level 4.9% weaker compared with the same time a year ago,.

According to HIA economist, Geordan Murray, the figures indicate that the investor market eased by around 3.4% during February, but remained around 9.9% higher than the same period a year ago. The majority of the growth in investor lending has been to those purchasing existing homes. In February over 90% of lending to investors went into the existing home market.
‘Lending activity in the first home buyer market remained quite weak. The number of loans to first home buyers in the three months to February 2015 was around 8.2% lower than the corresponding period a year earlier,’ he pointed out.
Comparing the total number of owner occupier loans for new housing in February 2015 with February 2014 shows that only Victoria and Tasmania recorded growth of 3.2% and 71.7% respectively.

Elsewhere, there were declines in New South Wales of 0.4%, Queensland at 1.7%, South Australia at 17.4% and Western Australia at 12.8%.