Land prices are escalating as supplies dwindle nationally, with prices going up 32 per cent in Greater Sydney in the past 12 months.
The HIA-Corelogic Residential Land Report data showed land prices nationally had increased 12.6 per cent in the past year—the strongest surge in prices since 2006.
HIA economist Angela Lillicrap said the result had been expected given the meteoric rise in new building approvals over the period in the wake of the federal government’s HomeBuilder stimulus package.
“A significant increase in the price of land indicates that supply is not keeping pace with demand,” Lillicrap said.
“Over the year to September 2021, the median price of land in Australia increased by 12.6 per cent. This is the strongest annual increase since 2006.”
“In Greater Sydney alone, the median price of residential land increased by 32.2 per cent over the year to September 2021.
“Land will be the biggest constraint on building activity over the next couple of years. The current shortage of land will impact the industry at a time when the broader economy needs construction to help pull it forward.”
Across the combined capital cities there was a 14.7 per cent increase, while regional price increases were at 8.6 per cent across the year, indicating the constrained land supplies in capital cities nationally.
Corelogic’s head of research Tim Lawless said the record levels of building approvals in concert with the constraints involved with bringing newly subdivided land to market had made land price surges inevitable.
“What is more counter-intuitive is the trend towards fewer land sales through 2021, a pattern that is evident across each of the state capitals despite strong demand,” Lawless said.
“Softer volumes are more a reflection of short supply rather than a lack of demand, which helps to explain the sharp rise in land values at a time when the volume of land sales is reducing.”
And in good news for construction firms, the pipeline for new house builds is galvanising in 2022 off the back of a boost in new home sales in December.
HIA economist Tom Devitt said sales of new detached homes increased 11.3 per cent in December, and it was the fifth consecutive monthly increase, despite the end of HomeBuilder in March 2021
“This is the highest level of new home sales since 2011, excluding the three largest spikes associated with HomeBuilder,” Devitt said.
“Sales in the final quarter of 2021 were also 25.5 per cent higher than the previous quarter.
“Underlying demand for housing remains exceptionally strong as the pandemic continues to push households toward lower density living. It appears that the more time people spend under lockdown and working from home, the higher is the demand for detached housing and renovations activity.”
Devitt said the market was in a “super cycle” of housing demand across the country.
“The constraint on home building is not demand but the availability of land, labour and materials. The shortage of labour and materials has led to construction timeframes increasing significantly,” Devitt said.
“As a result, the volume of approved-but-not-yet-commenced work is at its highest level in over a decade.”
Queensland enjoyed a bumper three months to December 2021 with sales figures 49 per cent higher than the previous quarter. Victoria recorded a 36.8 per cent increase across the quarter, followed by New South Wales (30.2 per cent) and South Australia (11.2 per cent).
Western Australia chalked up a minor downturn, falling 8.8 per cent in the December quarter.