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Pressure of the residential land market set to continue

1 May 2014
The latest HIA-RP Data Residential Land Report shows that conditions in Australia’s residential land market continued to tighten during the December 2013 quarter.

Housing Industry Association Senior Economist Shane Garrett said during the final quarter of 2013 the total number of residential land sales declined by 1.8 per cent to 15,447 lots. This was the second consecutive quarter of declined activity in the land market while the median price rose by 4.2 per cent.

The figures add further to the evidence of serious supply issues in the residential land market, he added.

“For the second consecutive quarter we have seen turnover in the market decline while at the same time lot prices have shown significant increase.

“This is a sign that the supply of residential building and is starting to fall behind the demand for new homes. The upturn in residential building which has much to contribute to overall economic growth risks being brought to a halt by inadequate land provision.”

Mr Garret said that policy makers should act quickly to ensure that the supply of land is boosted across Australia. Mr Garrett trusts this will improve the chances of sustaining the recovery in residential construction.

“New home building offers the possibility for some economic good news this year. It is important that land supply policies act in concert with broader economic objectives,” he said.

RP Data’s Research Director Tim Lawless added that the combination of low interest rates together with Government grants for newly constructed housing is increasing the demand across the vacant land sector at a time when land sales are trending low.

“Considering that the number of house and unit sales rose by almost 8 per cent over the December quarter and were up by 18 per cent compared with a year ago, the slowdown in land sales over the second half of 2013 is counter to broader housing market trends,” Mr Lawless said.

“With vacant land prices continuing to rise at a time when volumes have moved lower we can surmise that demand is exceeding supply which in turn drives prices higher. With housing affordability coming increasingly under the spotlight, an improvement in the flow of land supply would be a welcome scenario.”

Key markets like Sydney, Brisbane and Perth all saw a lower turnover during the final quarter of 2013, with transactions increased in Melbourne, Adelaide and Hobart.