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Inflated land prices hurting recovery

by Staff Reporter10 minute read
The Adviser

By: Staff Reporter

Surging land prices could affect Australia’s housing recovery, a joint report by RP Data and the Housing Industry Association (HIA) has found.

According to the Residential Land Report, the price of raw land increased 2.2 per cent to a record $185,222 in the December 2009 quarter.

The report also found that the weighted median land price for Australia is growing at an annual rate of 14 per cent – the fastest pace since mid 2004.


Meanwhile the volume of land sales fell substantially in original terms in the December 2009 quarter.

Land sales were down by 4.6 per cent in the December 2009 quarter compared to the December 2008 quarter.

In the September 2009 quarter sales were 26 per cent higher when compared to the same quarter in 2008.

HIA chief economist Dr Harley Dale said that over the year to December 2009, new house prices (excluding land) grew by 2.8 per cent, building materials prices increased by 1 per cent, labour rates fell marginally, yet median land prices jumped by 14 per cent.

“Throughout the last housing up-cycle, land values consistently grew at a substantially faster pace than construction costs and the general rate of inflation. Only six months into a new home building recovery this situation is happening all over again. If this situation continues then the recovery will stall, the housing shortage will worsen, and there will be upward pressure on rents and on existing home values that could have been avoided,” Dr Dale said.

Sydney remains the most expensive residential land market in the nation with a median price of $275,000.

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