The latest Housing Industry Association (HIA)-CoreLogic Residential Land Report showed that the price and number of vacant residential land lots sold increased across the state capital cities over the June 2018 quarter. On annual basis, however, sales have dropped.
The weighted median residential lot price for Australia’s state capitals was observed to jump by 3.8% to $336,124 during the quarter — marking a 15.5% hike over the year.
The report also found that Melbourne saw the strongest price increases in new vacant residential land. On a per-square metre basis, the value of vacant residential land in Victoria’s capital tracked higher by 26.5%.
Notably, Sydney held on to its title as the country’s most expensive market for vacant albeit the strong growth in Melbourne. Sydney’s residential land had a median residential lot price of $477,250 in the latest quarter.
HIA Acting Principal Economist Geordan Murray noted, though, that an inadequate supply of affordable, shovel-ready residential land was one of the major barriers to housing affordability.
“The strong price pressures that capital city land markets are still experiencing indicates that the process of delivering new land supply and the requisite infrastructure for new housing is still too costly,” he added.
Digging deeper into the data, CoreLogic Research Director Tim Lawless pointed out that compared to a year ago, vacant land sales have fallen dramatically. The aforementioned figure was down by 22% relative to the June quarter in 2017.
He attributed the downward shift to tighter credit conditions and an overall weakening in housing market conditions.
The worse part? While activity in the vacant land market has declined, land prices are consistently increasing with capital city land prices higher by 15.5% and regional vacant land prices were almost up 5.2% over the twelve months ending June.
Given the state of things, Lawless believes that the increase in the cost of residential land will be another impediment to affordability.
“Considering CoreLogic reported residential dwelling values were down almost 2% over the year to June, the surge in vacant land prices highlights a shortage of developable land across Australia’s capital cities that is continuing to exert upwards pressure prices. The consistent and substantial increase in the cost of residential land is clearly an impediment to housing affordability, which is slowly starting to improve as housing values drift lower and household incomes edge higher,” he said.
For reference, the price of vacant land in Sydney is now well over $1,100 per square meter and around 30% higher than the second most expensive vacant land market, Melbourne, where the cost per square meter is $885.
Should land prices continue to rise and construction costs to increase at a faster pace than inflation, Lawless projected that the overall result for new detached housing is inevitably higher price points and increasingly stretched levels of affordability.
The HIA-CoreLogic Residential Land Report provides updated information on lot prices and sales activity in 47 markets across Australia – including the six state capital cities.