The Housing Industry Association (HIA)-CoreLogic Residential Land Report for the September 2020 quarter has revealed that demand for residential land jumped by 27.7 per cent, driven by the popularity of construction grants and support initiatives such as HomeBuilder, according to HIA economist Angela Lillicrap.
The report, which includes sales activity in 51 housing markets across six state capital cities, has found that there was a 62.7 per cent increase on demand when compared with the same time last year.
According to Ms Lillicrap, the housing market was bolstered by “multiple interest rate cuts, house price growth and the easing of tight finance restrictions”.
“HomeBuilder was the catalyst for improved confidence in the housing market”, with strong demand for residential land expected to continue into 2021, she said.
Although residential land prices in the September 2020 quarter fell by 1.5 per cent, she added that land prices can lag behind changes in demand due to the length of settlement periods.
Moreover, she added that the process of producing shovel-ready land commonly takes over a decade, which makes it difficult for land supply to respond to changes in the short term.
“As a consequence, a sudden increase in demand for land will likely result in prices increasing,” Ms Lillicrap concluded.
Similarly, Eliza Owen, CoreLogic’s head of residential research, said it was “remarkable” to see how government policy had shaped demand as sales picked up through the September quarter of 2020.
“So much of the state and federal government housing stimulus extended through 2020 was for new dwellings, including HomeBuilder, temporary changes to stamp duty across NSW, and later, the extension of the First Home Loan Deposit Scheme announced in the October budget,” she said.
“The strong surge in demand for vacant land also reflects a shift to demand for houses in regional Australia, and on the periphery of major cities.”
This is corroborated by an increase in ABS house approval figures, which were up 8.4 per cent in the year to November 2020, as unit approvals actually declined in the same period, she noted.
“Demand for new housing will likely start to taper around the end of the March quarter, which is the current expiry date for the HomeBuilder scheme. This could reduce pressure on demand for vacant land through 2021,” Ms Owen concluded.
According to the latest figures, as at 31 December 2020, a total of 75,143 households had applied for the federal government’s HomeBuilder grant, with a total of 59,763 households – or 80 per cent – having applied to construct a new home, while 15,380 applied for rebuilds.
[Related: Apartments drag down building activity]