Residential land prices in most markets have declined over the previous year, according to the latest HIA-CoreLogic Residential Land Report. The one exception? Melbourne.
The report showed that residential land prices in Sydney, Australia’s largest market, have fallen from $479,000 per lot in September 2017 quarter to $467,500 during the March quarter of this year.
Brisbane also saw its land prices dropping over the same period.
Melbourne, however, saw lot prices hit a new high of $359,000 during the March 2018 quarter.
The drastic rise (29.3%) in the land price per square metre of Victoria’s capital happened against a 5.3% annual surge in the CoreLogic Hedonic Index for the Melbourne dwelling market.
“Looking at higher frequency movements, the index suggests a 0.5% decline in the Melbourne dwelling market over the March quarter, and a further 1.4% decline in the three months to June,” explained CoreLogic’s Commercial Research Analyst Eliza Owen.
This means that although the price of land across the city has recorded very high increases between September 2016 and March 2018, demand may soon weaken, and land prices could drop accordingly.
HIA Senior Economist Shane Garrett, meanwhile, highlighted that land values play a large part in home prices. “As the single largest ingredient of every new home, land prices have major implications for affordability.”
He also said that governments must be ready to provide the land needed to house the country’s growing population.
“Home ownership will become even harder to grasp if sufficient volumes of residential land are not delivered year on year in a manner that the market can keep track of,” Garrett said.
Garret’s concerns seem to be a reality in the present market when one looks deeper into CoreLogic’s data. The research firm stated that while the capital city housing markets are slowing residential land sales data continuously dipped against price surges. “In the year to March 2018, the value of residential land across Australia increased 11.8%, against a 28.4% decline in the number of sales,” CoreLogic reported.
This implies that a scarcity of available land may be restraining transaction activity.
“CoreLogic is finding fewer new development applications for residential projects added to the pipeline across Australia. The number of new residential development applications observed in the March quarter was 1,412, (6%) lower than the previous quarter. Lower levels of development activity are likely to be another consequence of softened housing market demand,” concluded Owen.
The July 2018 edition of the HIA-CoreLogic Residential Land Report provides updated information on lot prices and sales activity in 47 markets across Australia – including six of the capital cities.
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