- The cost of residential land has grown more than twice as quickly as the cost of construction materials in the last year, according to HIA
- According to the ABS, a lack of building supplies has caused delays in home construction across the country and contributed four per cent to the cost of homebuilding in 2020/21
- “At the same time, the cost of residential land prices rose by 8.5 per cent, adding further to the cost of new home building,” HIA chief economist Tim Reardon says
- The number of vacant land transactions has been declining due to a combination of reduced stimulus and a lack of supply, CoreLogic’s Tim Lawless says
The cost of residential land has grown more than twice as quickly as the cost of construction materials in the last year, according to the Housing Industry Association (HIA).
Data from the Australian Bureau of Statistics shows a lack of building supplies has caused delays in home construction across the country and contributed four per cent to the cost of homebuilding in 2020/21.
“At the same time, the cost of residential land prices rose by 8.5 per cent, adding further to the cost of new home building,” HIA chief economist Tim Reardon said
“Land supply has been in tight supply for the past two decades and the surge in demand in 2020 has seen land prices in Sydney rise 27.1 per cent in the past year alone. The strength of demand for land is set to continue throughout 2022 and into 2023.”
The HIA-CoreLogic Residential Land Report provides up-to-date statistics on sales activity in 51 Australian property areas, including six state capital cities.
As land is a vital component of housing, this price growth has been a major driver of rising home prices and a deterioration in housing affordability, according to Mr Reardon.
“There is little state and Australian governments can do to improve global supply chains and improve the availability of building products, but they are in direct control of the volume of land available for home building,” he said.
“Ensuring there is an adequate supply of land to meet housing demand is a key responsibility of state and territory governments and one of the necessary steps to addressing the affordability challenge. There is no better time than now to increase the supply of available land and make a generational step toward improving housing affordability.”
The number of vacant land transactions has been declining in recent quarters as a result of a combination of reduced stimulus and a lack of supply, according to CoreLogic research director Tim Lawless.
“The HomeBuilder grant saw demand for vacant land brought forward, with land sales surging through the second half of 2020,” he said.
“However, the more recent trend has been a slowdown in land sales but a surge in detached housing construction as the nation moves into the early stages of what is likely to be an extended period of residential detached housing construction.”
The year’s strong rise in unoccupied land prices, along with growing building costs, will put more upward pressure on the cost of new dwellings, according to Mr Lawless.
“The lift in land prices and residential construction costs along with the value of established housing rising rapidly, is set to add further pressure to housing affordability challenges that are becoming increasingly apparent across the country,” he said.