The land supply in Australia is unlikely to meet the demand for the federal government’s plan to build one million well-located homes over five years starting 2024.

CoreLogic Economist Kaytlin Ezzy said given the current land supply, the government’s goal is an ambitious one — over the five years to June 2022, only approximately 975,000 homes were completed.

“While the interest rate rises seen over the past six months will have put some downwards pressure on land prices, until there is a material change in supply, median land prices will likely remain elevated” she said.

According to the latest Housing Industry Association (HIA) – CoreLogic Residential Land Report, land prices increased 15.4% over the year to June 2022 quarter — this is the fastest annual growth rate since 2004.

HIA senior economist Nick Ward said prices appear to have risen close to consumer’s capacity to purchase land.

“The increases in the cash rate will likely further constrain consumer’s ability to buy, risking a reduction in the number of homes expected to be built,” he said.

“In order to achieve the Australian government’s target of building one million new homes over five years from 2024, the supply of land will need to improve in the near future and the cost decline.”

The plan to build one million homes over the next five years is part of the landmark National Housing Accord, an agreement among all levels of government, institutional investors, and the construction sector to help address the housing supply problem.

On top of the promise to build one million homes, the Accord covers a range of action points that will help shape sustainable, and long-term plans for additional housing and affordability:

State and territory governments will expedite zoning, planning, and land release for social and affordable housing.

The Commonwealth will provide financing options through the Housing Australia Future Fund to facilitate institutional investment in social and affordable housing.

The Accord will work with local governments for planning reforms and freeing up landholdings.

The construction sector will support high energy efficiency rating in construction.

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