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The HIA-CoreLogic Residential Land Report has revealed an acute shortage of available land has driven the price of property up by 22.5 per cent over the three years from March 2020 to March 2023.
This compares to a 5.1 per cent increase in the three years prior.
HIA senior economist Tom Devitt explained the volume of residential land transactions has fallen 37 per cent over the 12 months to March 2023, which is contributing to the higher values.
“This land shortage continues to drive up prices despite the sharpest increase in interest rates in over 30 years and will weigh on home building activity in the coming years,” Mr Devitt said.
“This will see the volume of new home commencements slow over the next year.”
He further elucidated that although a swift escalation in interest rates typically exerts downward pressure on property prices due to reduced demand, the ongoing low supply stock is intensifying the housing crisis.
Indeed, recent residential property values have been increasing for the past five months, following 10 consecutive months of decline, according to CoreLogic. However, it also noted the increase in values is starting to ease.
“As the market begins to normalise from the shocks in recent years, it is expected that both sales and prices will return to their historical trend,” Mr Devitt added.
However, this depended on the government’s ability to “adequately plan its land release pipeline”, which in turn depends on the availability of data across all stages of land release.
The report provided updated information on sales activity in 51 housing markets across Australia, including the six state capital cities.
In the near term, the reduced supply of shovel-ready land will weigh heavily on the number of new homes commencing construction in 2024.
On average, it takes 10 years to move land through the seven stages of land release.
“Decisions made today about land release can be expected to affect housing supply 10 years from now,” concluded Mr Devitt.
“The time it takes to progress from a vacant block of land to a block that is shovel-ready with titles could be a major roadblock to the government’s plan to build a million homes over the next five years.”
While sales numbers have eased significantly from the peak volumes seen during the HomeBuilder scheme, it will take some time before we see a more notable recovery in supply levels, CoreLogic’s economist Kaytlin Ezzy added.
“Although the rate tightening cycle has seen some capitals record mild declines in recent months, land prices overall have remained fairly resilient, thanks to the shortfall in available land supply,” Ms Ezzy said.
“We can expect land prices will remain elevated, dwelling approvals will continue to track below average, and house commencements will continue easing.”
[Related: House value growth is easing: CoreLogic]
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