Land prices soar, outpacing CPI and building costs

The median price of residential land across Australia rose sharply, increasing by 7.6 per cent over the past year, according to the latest HIA-CoreLogic Residential Land Report. This growth has far outpaced the rise in the cost of other goods and services in the economy.

The report, which tracks sales activity in 52 housing markets across the country, revealed that the median price of land sold in the September quarter of 2024 reached a record high of $366,510.

HIA economist Maurice Tapang said that land prices have been rising at more than double the rate of inflation, as measured by the ABS Consumer Price Index (CPI) and five times faster than the increase in home building material costs, as measured by the Producer Price Index (PPI).

“Australia’s capital cities are continuing to drive this strong growth,” Tapang said, with the median price of land in these areas rising by 9.2 per cent to $408,160.

“Prices have increased the fastest in areas where home building activity is picking up or where the cost of providing infrastructure for new lots is high.”

Brisbane and Perth have seen the most significant price increases, with Brisbane’s median land price climbing by 21.2 per cent and Perth’s by a dramatic 38.6 per cent over the past year.

Meanwhile, Sydney experienced a more modest 7.2 per cent increase, despite weaker home building activity than in other capital cities. The cost of delivering shovel-ready land in Sydney remains high, contributing to the price rise.

Despite these challenges, there are signs that buyers are exploring alternative opportunities, such as purchasing land in regional areas or opting for smaller lots. The median price of land in Australia’s regions grew by a slower 2.0 per cent over the same period, reaching $281,910.

However, the ongoing shortage of land for residential development remains a significant barrier to increasing housing supply. The limited availability of both greenfield and infill land poses a risk to the government’s target of building 1.2 million homes over the next five years.

“The inadequate supply of land for residential development continues to act as a key constraint on housing supply,” Tapang said.

“Increased urgency and commitment from governments to release more land and service it with essential infrastructure is critical to alleviating rising land prices and helping more Australians into homeownership.”

CoreLogic economist Kaytlin Ezzy echoed these concerns, saying that affordability remains a major hurdle for many Australians trying to enter the housing market.

The combination of rising land prices, increasing construction costs, and the prolonged period of high interest rates has made home ownership increasingly out of reach for some.

“While the number of new dwelling approvals increased slightly in the year to November, they are still well below the numbers needed to meet the government’s target,” Ezzy said.

“The gap in new dwelling approvals is -17.8 per cent below the decade average and almost -30 per cent below the 240,000 new homes needed annually.”

The report also highlighted a decline in new dwelling purchase prices, with some builders offering discounts and promotions in an effort to secure business amid ongoing margin pressures. Despite this, the overall affordability crisis remains a significant challenge for the housing sector.

[RELATED: Can the ambitious target of 1.2m homes be met?]

Adrian Suljanovic is a journalist at Broker Daily with more than two years experience reporting on all facets of the third party distribution channel.

Adrian has written for a range of business and finance titles including IFA, Investor Daily and Lawyer’s Weekly before joining the mortgages team in 2022.

He graduated from the University of Wollongong in 2021 gaining a Bachelor of Communication & Media with a major in Digital & Social Media.

E-mail Adrian at: This email address is being protected from spambots. You need JavaScript enabled to view it.