Land prices surge by 7.6% nationwide
The median price of land in Australia has soared to record highs, increasing more than twice the rate of the ABS consumer price index (CPI) and five times faster than building material costs, a new report showed.
The new Housing Industry Association-CoreLogic Residential Land Report revealed that land prices nationwide grew by 7.6 per cent compared to the previous year, outpacing the rise in other goods and services across the economy.
The report analysed sales activity across 52 housing markets in Australia, including the six state capital cities.
It has found that in the 2024 September quarter, the median price of a lot sold was $366,510.
HIA economist Maurice Tapang said the land prices have increased to new records, quickly outgrowing the rest of the economy.
“Land prices have risen by more than double the rate of growth in the ABS consumer price index (CPI) and five times faster than growth in the cost of home building materials, as measured by the producer price index (PPI) over the same period,” Tapang said.
“Prices have increased the fastest in areas where either home building activity is beginning to pick up or where the cost of providing the infrastructure for new lots is high.”
The report showed that capital cities have been driving the growth, with a median price increase of 9.2 per cent compared to 2023, reaching $408,160.
Brisbane and Perth saw the strongest growth in median land prices, rising 21.2 per cent and 38.6 per cent, respectively, over the last 12 months.
Sydney's median land price increased by 7.2 per cent annually, reaching a median price of $710,000, despite weaker home-building activity than other capitals.
HIA NSW branch said the current land prices in Sydney highlighted that housing affordability is at an “all-time low”, with the cost of delivering shovel-ready land to the market remaining high.
HIA executive director NSW Brad Armitage said the NSW government needs to review its stamp duty settings.
“With land prices this high, stamp duty is an even greater hurdle to buying a home,” Armitage remarked.
“It is becoming rare for first home buyers to be able to access grants even in regional NSW.”
“Current stamp duty exemptions and grants for first home buyers must be lifted to be reflective of home and land prices across both metropolitan and regional NSW,” Armitage said.
Conversely to capital cities, the HIA-CoreLogic report showed that regional areas remained more affordable, with the median land price growing by 2 per cent to $281,910.
Tapang said that the number of buyers in regional areas has increased as investors have been looking at cheaper options to buy land.
“There are signs that despite the rise in land prices, particularly in the capital cities, buyers are looking at better opportunities to purchase land, whether through exploring growing regional locations or buying smaller lots,” Tapang said.
“In areas such as the Illawarra and Geelong, where the median land price is lower than their respective capital cities, lot sales have increased by over 50 per cent compared to the previous year.”
According to Tapang, the persistent shortage of land for residential development, both greenfield and infill, remains a major constraint on housing supply and threatens to derail the government’s goal of building 1.2 million homes over the next five years.
The recent Australian Bureau of Statistics (ABS) Building Activity data showed that Australia is already behind schedule in completing its National Housing target, lagging by 15,000 homes just months into the program.
To reach the expected target of 1.2 million homes by 2029, 60,000 new homes must be built per quarter. In the September 2024 quarter, only 44,884 homes had been built across Australia.
“Increased urgency and commitment from governments to release more land for residential development and adequately service it with essential infrastructure will alleviate rising land prices and help more Australians into home ownership,” Tapang said.
CoreLogic economist Kaytlin Ezzy said affordability remains a significant barrier to bringing new housing stock online.
“The continued uptick in land prices, coupled with upward pressure on construction costs and the higher for longer interest rate environment, has moved new home ownership further out of reach for some Australians,” Ezzy said.
ABS data recorded approximately 169,000 new dwelling approvals up to November 2024, a 0.5 per cent increase from the previous year but still 17.8 per cent below the decade average.
To meet the government target, 240,000 annual approvals are needed.
“With the HomeBuilder backlog largely worked through, some builders are coming up against a shortfall in new work,” Ezzy said.
“The ABS noted in November monthly CPI release a -0.6 per cent monthly decline in the new dwelling purchase prices, with some builders offering discounts and promotions in order to secure hesitant business, despite ongoing margin pressures,” Ezzy concluded.