The latest HIA-CoreLogic RP Data Residential Land Report shows there is insufficient shovel-ready land in some markets, Housing Institute of Australia chief economist Harley Dale said.
“This is placing undue upward pressure on residential land values,” Mr Dale said. “Construction of detached houses looks to be peaking for the cycle, but there is unrealised demand out there because of that lack of readily available and affordable land.
“The price of residential land per square metre increased in Sydney, Melbourne and Perth in the December 2014 quarter, with Sydney remaining the country’s most expensive land market by some margin.”
The number of residential land sales declined by 11.8 per cent in the 12 months to the December 2014 quarter, while the weighted median residential land value rose 6.3 per cent in the period.
“The increase in the weighted median value was driven primarily by Sydney, with significant growth also evident for Perth and Melbourne,” Mr Dale continued.
The price of Sydney’s median lot (480 square metres) rose 15.4 per cent year-on-year to $345,000, while the number of new residential lots sold stagnated when compared to the September quarter (down 0.5 per cent) to sit slightly above 1,200.
In Melbourne, the median lot (444 square metres) price rose to $225,000, up from $207,000 in the corresponding quarter of 2013, while the number of lot sales declined by 11.6 per cent on a quarterly basis to just above 2,000.
In Perth, the price of a median lot (435 square metres) rose by 9.3 per cent in 2014 to $271,000, while the number of lot sales dropped by 7.7 per cent on-quarter to just above 2,000.
Outside capital city markets, the Richmond-Tweed region in northern NSW led the way in terms of median (residential) lot prices at $274,000, followed by the Kimberley region of Western Australia at $251,500 and the Sunshine Coast in Queensland at $250,000. The cheapest residential lots can be found in South Australia’s South East region at $72,000.
According to CoreLogic RP Data research director Tim Lawless, the number of vacant residential land sales has been trending lower since mid-2013 and, concurrently, median land prices have been rising to new record highs.
“The opposing trends are a clear sign that demand is outweighing supply, which pushes land prices higher,” Mr Lawless said.
“Higher land prices ultimately lead to less affordable homes – it is the high cost of vacant land that significantly contributes to the increasing cost of housing. Ideally we should be seeing more land brought to the market and sold during this period of low borrowing costs.”
[Related: Housing approvals at near record levels]