Acute supply problems affecting residential building land in Australia
The residential land market in Australia is suffering for acute supply problems with prices rising and turnover falling, a new report reveals.
Turnover in the national land market declined by 16.7% during the September 2014 quarter and at the same time, price growth accelerated to 3.3%, according to the latest report from the Housing Industry Association and CoreLogic RP Data.
‘There are clearly pressures building in terms of new residential land supply. During the September 2014 quarter, the number of land market transactions fell, while price growth accelerated which are classic hallmarks of a market which is fast running into supply problems,’ said Shane Garrett, chief economist of the HIA.
‘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,’ he explained.
‘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,’ he added.
During the September 2014 quarter the weighted median price of residential land rose by 3.3% to $212,727 per lot, an all-time high for land prices nationally.
The data also shows that capital city land prices saw growth of 4.7% during the quarter, and were 10% higher than 12 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% during the quarter and were 3.5% 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,’ he said.
‘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. 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,’ he explained.
‘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,’ he added.