However, over the six months to March 2014, residential land sales were still up by 5.9% when compared to the six month period to March 2013, the latest HIA-RP data shows.
In the March 2014 quarter the weighted median price of residential lots increased by 2% to $205,248, marking only the second time the value has exceeded the $200,000 threshold. Capital city lot prices increased by 3.3% in the quarter to be up by 7.5% compared to the March 2013 quarter.
The land report also shows that lot prices in regional Australia eased by 0.7% in the March quarter this year to be up by 2.4% in annual terms.
According to RP Data’s research director, Tim Lawless, the early peak in land sales is likely to dampen expectations that investment in new housing construction will help to support Australia’s economic transition away from resources related infrastructure projects.
‘Policy makers were placing a great deal of importance on renewed levels of housing construction to act as a new pillar for economic expansion. While there has been uplift in approvals and new housing starts, the trend towards fewer land sales since September last year suggests that the housing construction cycle, at least for detached housing, is close to peaking,’ Lawless explained.
‘The ongoing rise in land prices at a time when sales are falling is a worry, particularly in Sydney where the number of sales over the March quarter was about level with the previous year but the median price of land has moved 5.6% higher over the year,’ he added.
HIA chief economist Harley Dale pointed out that there is a close relationship between residential land sales and detached house starts. ‘The indication is that the upcycle in detached housing will peak during 2014. This prospect further highlights the key swing variable role the multi-unit sector will play in determining the eventual magnitude and duration of the current new home construction cycle,’ he noted.
‘On the price side of the land equation, an acceleration in the growth rate for capital cities in the March 2014 quarter is of concern. The upward trajectory for residential land prices since the middle of last year is steeper than it should be. There is clearly a policy failure this cycle, as in many before it, to ensure a supply of shovel ready land commensurate with the demand for new housing,’ he added.
