Short supply drives hike in land prices

Australia’s residential land market showed signs of increased supply pressures during the closing quarter of 2016, according to the latest HIA-CoreLogic Residential Land Report.

Commenting on the findings, HIA senior economist, Shane Garrett remarked: “The volume of residential lot transactions appears to have dipped sharply during the December 2016 quarter, placing pressure on land prices.

“With land being such a crucial ingredient in new home supply, more challenging cost conditions in the market for residential land in 2017 will make the battle to improve housing affordability more difficult.”

According to Eliza Owen, CoreLogic’s commercial research analyst, the continued fall of sales volumes against sustained value increases suggests demand is outstripping the available supply of vacant residential lots.

She added that this is particularly evident in Melbourne, where the value of lots experienced the highest growth of all capital cities in the year to December (16.3 per cent). Sales volumes in the city fell 15.2 per cent in the six months to December 2016.

“With housing affordability high on all government’s agenda, and an increasing concern for households, particularly in Sydney and Melbourne, more attention must be paid to how increased supply of residential land could help ease demand,” she concluded.

According to the report, the weighted median land lot price rose by 4.8 per cent to $254,406 during the December 2016 quarter – 9.3 per cent higher than a year earlier. The report also showed that the estimated number of land lot sales across Australia totalled 10,756 during the final quarter of 2016 – down by 22.7 per cent compared with the previous quarter, and 39.5 per cent lower than a year earlier.

Based on land transactions during the December 2016 quarter, the annual pace of residential land price growth was strongest in Melbourne (+16.3 per cent), followed by Sydney (+10.7 per cent) and Adelaide (+10.3 per cent). Meanwhile, Perth’s residential land market experienced the weakest price growth (+0.9 per cent) with modest land price increases affecting Brisbane (+5.4 per cent) and Hobart (+3.1 per cent).

“We need to make it easier and less costly to deliver additional stocks of shovel-ready residential land to market. This can only be done by tackling planning delays in zoning and subdivision, releasing government-held land and improving funding mechanisms for housing infrastructure,” Mr Garrett concluded.

[Related: Oversimplifying housing affordability ‘cynical and cruel’, says Treasurer]