How much does land cost across Australia? (July 2024)
As undersupply problems persist, a new report has compared the changing costs of land the country over.
A new report from the Housing Industry Association (HIA) and CoreLogic – the Residential Land Report – has crunched the numbers on 51 housing markets Australia-wide, including six of Australia’s capital cities.
Over the March quarter, the average residential lot sold for $343,480 – a 3.3 per cent lift on the price recorded over the March quarter in 2023.
In capital cities, the rate of growth is even higher, with land prices sitting 4.4 per cent higher than they were 12 months ago.
On the other hand, regional land prices lifted by just 0.9 per cent over the same period.
The growth seen across capital cities is, in part, thanks to the fact that “Adelaide, Brisbane and Perth are seeing residential land values grow at a rapid rate, while Sydney and Melbourne’s values remain relatively stable,” explained HIA senior economist Matt King.
“There are evidently two speeds of price growth in residential land market values, with the smaller, more affordable capital cities seeing sharper increases in prices,” he pointed out.
“Perth, Brisbane and Adelaide are currently sitting in the fast lane of growth in residential land prices with double-digit annual increases. Hobart grew by 2.4 per cent over the year, Sydney remained flat, while prices in fact fell in Melbourne compared to the previous year.
According to Kaytlin Ezzy, economist at CoreLogic: “The recent divergence in capital city land price growth mirrors the recent trends in dwelling value growth, with mid-sized capitals like Perth, Brisbane and Adelaide far outstripping Sydney and Melbourne.”
“Affordability continues to be an important factor driving this divergence, with the high interest rate environment skewing demand away from the more expensive end of the market,” she said.
That is seeing many would-be buyers pivoting towards more affordable capital city and regional alternatives.
When it comes to the regions, King noted these land markets have slowed in comparison to the metro areas, “with the post-pandemic return of households to the capital cities offsetting the relative affordability advantage of many regional markets”.
While prices are still lifting, King does have concerns about the number of lots that were sold over the March quarter.
Volumes over the period from January to March were down 9.1 per cent compared to the previous quarter, “reflecting the dampening effect of sustained high interest rate environment and the inability of policymakers to bring sufficient land for residential development to market in a timely way”.
He conceded the decline in the number of land lots that had been sold was broad-based – evident across all cities and regions earmarked by the report, arguing that there is a “damaging fixation on taxes and charges levied throughout the new home building supply chain”.
“Lot sales remain well below the pre-pandemic average, suggesting an ongoing lack of urgency from state and local governments to bring enough land to market for residential development.
“Land supply has been inadequate for the best part of a decade, and inefficient and inequitable taxes, such as stamp duty, have only compounded the problem and significantly inflated the cost of land,” he stated.
For Ezzy, it all comes back to that “persistent undersupply”, which she said “continues to be the most important factor hampering the delivery of new housing”.
“Since the onset of COVID, median land prices across the capitals have increased by between 16.4 per cent (Perth) and 54.2 per cent (Sydney), which has likely priced many potential home owners out of the new dwelling market.”
“Additionally, while growth in construction costs has stabilised in recent months, they remain well above the pre-COVID average, further pushing new dwelling ownership out of reach of many households,” she detailed.