Land value swells as demand drops

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Vacant land lot prices continued to rise despite declining land-sales volume, according to the latest Housing Industry Association (HIA)-CoreLogic Residential Land Sales Report.

During the September quarter, land lot prices across Australia hit $279,949— up by 0.8% for the quarter and 0.9% for the year, making it a record high. However, the number of residential land lots sold dropped by 16.2% over the same period—down 25.8% from the figure logged in 2017.

A fall in demand for land would usually mean a decrease in land prices. The “anomalous prices-sales behaviour” in the land market, in which prices increased as demand fell, is likely to reflect a lag in the impact of a material change in market conditions, said the report.

“After five years of exceptionally strong sales activity, a credit squeeze and a loss of market confidence led to a rapid fall in new home sales and approvals. This slowdown is evident in land sales, and unfortunately, the fall in demand has not yet resulted in a fall in price,” said HIA Chief Economist Tim Reardon.

In addition, this condition puts pressure on the new home market and could impede activity in the home-building market.

Should the cost of new-home production continue to rise, fewer new homes are going to be built as customers opt to buy an established home or delay a new home purchase, the report said.

“It is this shortage of supply of new homes that was the key factor that drove rapid house price growth over the past two decades,” the report said.

The March 2019 edition of the HIA-CoreLogic Residential Land Report assesses activity in 47 markets across Australia, including the six state capital cities.

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  • Ben says on 18/03/2019 01:48:02 PM

    Be careful - Data is from sept qtr jul - sept 2018. Old sales, correction not flowing through yet

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