As residential land prices grow to historical highs, the mismatch between strong demand and a limited supply of new housing “remains acute”, industry agencies have said.
In the Residential Land Report for the March 2017 quarter, released in September, the Housing Industry Association (HIA) and CoreLogic reported that the average residential land price grew to $253,525 in the March quarter.
The figure reflects an increase of 2.1 per cent on the price of a typical vacant lot of land. According to the agencies, the dollar value is the highest in the report’s history.
Further, regional markets saw a 7.7 per cent increase in land turnover in the March quarter despite a fall of 1.6 per cent in transaction volumes, compared to the same period last year.
HIA senior economist Shane Garrett said that land price increases are “unrelenting”. He added: “The substantial increase in the price of residential land continues to be the single biggest factor behind recent deteriorations in housing affordability.
“The solution to the housing affordability challenge lies in ensuring that the additional residential land needed across our cities and regional towns is delivered in the right place, at the right time and at the lowest price. This should be a key imperative for governments at all levels.”
The report noted that residential land prices in Sydney were “easily the most expensive” of the 47 markets measured — at $450,000 per lot. “They set their own new all-time high in March 2017,” the report added.
Comparing that figure to the average Sydney lot price of $268,500 in the March 2012 quarter highlights an increase of 67.6 per cent.
As it stands, Perth is the second most expensive capital city for residential lots. The report noted: “Despite the downturn in mining project investment locally, land prices in Perth have held up quite well and WA’s capital remains the second most expensive capital city for residential land ($262,000 per lot).”
Melbourne was the third-placed capital city, with $260,000 per lot, although HIA and CoreLogic predict that it will likely surpass Perth “in the near future”.
Further, Melbourne experienced the greatest rate of growth in median lot value, surging by 16.6 per cent on the previous year and 4.0 per cent on the previous quarter.
Hobart remained the cheapest of the capital cities at $143,000 per lot. Additionally, Hobart was the only capital city to record a year-on-year fall (-8 per cent) in median lot value. Quarter-to-quarter, Hobart’s property value fell by 2.7 per cent.
The weighted median lot value for all capital cities grew by 2.1 per cent on the December 2016 quarter and 9.8 per cent on the previous year’s figure to $290,536.
“The continued increase in residential land prices indicates that the problem of matching land supply with the strong demand for new housing remains acute,” the report said.
“The policy focus should remain on removing obstacles to the delivery of new residential land supply and reducing the cost of preparing land for market.”
By square metre, Sydney has the most expensive land with 1 square metre costing on average $997. Perth is the second most expensive at $699 per square metre, followed by Adelaide ($603), the Gold Coast ($587) and Melbourne ($582).
The northern part of South Australia was listed as the cheapest region at $95 per square metre.