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At a time when building is as important as ever, a shortage of appropriate land for development will soon slow progress on residential construction.
According to CoreLogic, the volume of residential land transactions has fallen 37 per cent over the 12 months to March 2023.
Housing Industry Association senior economist Tom Devitt said the news spells trouble ahead for home building, even as governments at all levels are intending to spur on residential construction.
“This will see the volume of new home commencements slow over the next year,” Mr Devitt said.
And he noted that as cost-of-living pressures bite, this will similarly add to financial factors stymying housing supply.
“An acute shortage of available land saw the price increase by 23 per cent over the three years from March 2020 to March 2023. This compares to just a 5 per cent increase in the three years before that,” Mr Devitt explained.
“This land shortage continues to drive up prices despite the sharpest increase in interest rates in over 30 years and will weigh on home building activity in the coming years.”
Under normal circumstances, increases in price growth would be expected to slow as the wider real estate market returns to a more normal state of fluctuation. But Mr Devitt noted that the future of land sales depends largely on the government’s ability to adequately plan its land release pipeline, which in turn is reliant on the availability of data across all the stages of land release.
“On average, it takes 10 years to move land through the seven stages of land release,” Mr Devitt said.
And he noted the long-term impacts of a failure to lift supply now that the shortage has become apparent.
“Decisions made today about land release can be expected to affect housing supply 10 years from now.
He described any slowdowns in land release as a potential “major roadblock to the government’s plan to build a million homes over the next five years”.
CoreLogic economist Kaytlin Ezzy agreed that it would take some time before the country can expect to see a recovery in supply levels.
Until stock picks up, she said: “We can expect land prices will remain elevated, dwelling approvals will continue to track below average, and house commencements will continue easing.”
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
