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Home building sector still soft

by Staff Reporter11 minute read
The Adviser

Staff Reporter

Strong home building activity is still a way off, new research has revealed.

According to the latest HIA-RP Data Residential Land Report, there was a significant decline in residential land sales in the September 2012 quarter.

“Residential land sales fell by 17.8 per cent in the September 2012 quarter, although the volume was still 14.9 per cent higher than the record low set a year earlier,” HIA chief economist Harley Dale said.

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“It is encouraging that land sales in a majority of markets have lifted off the depths plumbed in 2011.

“However, this latest update highlights the uncertainty around whether the new home building sector can mount a recovery that is both sustainable and of the magnitude Australia’s population and economy require.

“Overall, residential land sales, a key leading indicator of housing starts, signal a rocky road for any new home building recovery in 2013.

“One catalyst for the emergence of a strong new home building recovery would be the reduction in the cost of new housing, including serviceable land, which is brought about by disproportionately high and inefficient levels of taxation.”

According to RP Data’s research director Tim Lawless, the September results highlight the recovery in the vacant land market remains a fragile one.

“After consistent increases in the number of vacant land sales over the past three quarters, the lower September result is a stark reminder that consumers remain very price-sensitive and cautious about their household finances,” he said.

“Land developers and builders are facing the challenge of providing affordable house and land packages at a time when land costs, as well as construction costs, continue to rise. The median price of a vacant block of land rose 3.8 per cent over the September quarter last year despite the fall away in volume.

“The broader housing market remains on a recovery trajectory, and I would be surprised if the vacant land market continued the slippage in transaction numbers we saw in September. Low interest rates and a subtle improvement in consumer confidence, together with government incentives now more focused on new housing, are likely to be the driver behind a gradually improving market.”

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