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The price of residential land reached a new all-time high in the second quarter of the year.
According to the latest HIA-CoreLogic Residential Land Report, the median price of a residential lot surged to $351,044 in the second quarter of 2024, reflecting a 2.2 per cent rise from the previous quarter and a 6 per cent increase compared to the same time last year. Despite the price hike, only 10,788 lots were sold during this period, marking one of the weakest quarters for land sales in the 21st century.
The Housing Industry Association (HIA) attributed the rising prices to shortages and tax increases.
“The price of a lot of residential land reached a new all-time high in the second quarter of the year, driven by acute shortages and rising tax imposts,” stated HIA senior economist Tom Devitt.
He noted that the high prices are prevalent in both metropolitan and regional areas, with cities like Sydney and Melbourne particularly struggling. In Sydney, lot sales were less than half the decade average, whereas in Melbourne, they were just one-third.
“A rise in the price of land, while the volume of sales is suppressed, indicates that the shortage of shovel-ready land is deteriorating further,” said Devitt.
In highlighting the struggle with Melbourne’s housing market, Devitt commented that “with buyer confidence likely impaired by additional taxes imposed on land and housing supply, further adding to costs and restricting supply”.
New taxes such as the windfall gains tax and land tax surcharge, imposed in 2023 and 2024 respectively, further inflate land costs and reduce supply.
Meanwhile, cities like Brisbane, Adelaide and Perth have also experienced record-high greenfield land prices in the first half of the year. Devitt noted the prices in Brisbane are catching up to Melbourne.
“These record prices are being reached alongside – at best – unremarkable volumes of lot sales,” he stated.
The economist maintains that it’s crucial the nation keeps up with a solid pipeline of shovel-ready land, particularly as market confidence begins to rebound.
“Policymakers must work to reduce constraints and costs on new home building. This includes measures as set out in the HIA Planning Blueprint consisting of accelerating planning processes and approval times to facilitate increased infill development as well as speeding up the release of greenfield land and increased funding for critical enabling infrastructure to make projects shovel-ready faster,” Devitt stated.
After outlining the importance of reducing barriers to home construction, Devitt stressed the critical need for immediate action.
“Meeting government housing targets and improving housing affordability requires a significant boost to home building. Increasing land costs and uncertainties on industry and households will have the opposite effect,” he stated.
CoreLogic economist Kaytlin Ezzy echoed these concerns, pointing out that land prices are impeding the addition of new housing stock. “Over the year to June, approximately 176,000 homes were completed nationally. While up by 1.2 per cent year-on-year, this was 8.4 per cent below the decade average and 26.6 per cent below the 240,000 a year needed to meet the government’s five-year housing target,” she said.
Ezzy warned that without a steady pipeline of shovel-ready land, prices will continue to rise, and housing approvals and completions will fall further behind target, exacerbating the housing crisis.
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