The disparity between the cost of land in capital cities and regional areas in Australia has reached a new record, according to research from CoreLogic RP Data.
The median price of vacant land across the combined capital cities was recorded at $265,000, according to the data, while the median land price across the combined regional markets was $156,000.
CoreLogic RP Data research analyst Cameron Kusher says that the $109,000 (69.9%) price difference between regional and capital city prices is now the largest differential on record.
“It also goes some way to explaining the differences in the cost of built form (houses or units) in the capital cities relative to non-capital city areas,” Kusher said.
“Over the past year, capital city vacant land prices have increased by 4.0% compared to a -5.2% fall in prices in regional areas.”
At the end of 2015, the median lot size for capital city vacant land was 466sqm, having increased by 3.6% over the year. Across regional markets the median land size was a much larger 809sqm, having increased by 8.3% over the past year.
According to Kusher, land sizes have fallen over time in capital city and regional markets however, lot size compression has been much greater in capital cities.
“To put this in perspective, median lot sizes have fallen at a rate of -2.5% annually in capital cities over the past decade compared to falls of -0.5% per annum in regional markets,” he said.
Across the combined capital cities the median rate/sqm for vacant land was recorded at $552 at the end of last year. At the same time the rate was a substantially lower $179/sqm in regional markets.
“The fall in capital city rates/sqm is due to the increase in land sizes while in regional markets it is due to both prices falling and land sizes increasing over the past year.”
Sydney is by the far the most expensive capital city to purchase land. The median land price in the harbour city is $410,000, more than $100,000 more than the second most expensive city, Perth, where the median land price is $299,000.
“Today’s data provides valuable insights into the reasons why housing costs in the capital cities is so high. In a market like Sydney for example, if the typical land costs $410,000 it is difficult to imagine being able to buy the land and build a home for less than $550,000,” Kusher said.
“With housing affordability now back on the national political agenda it is likely we will see renewed focus on the high cost of developable land in our capital cities. Reforms to reduce the cost of the vacant land would go a long way to improving housing affordability, particularly for new homes.
Of course the other alternative is to encourage greater economic development of regional areas where the cost of housing is significantly lower than it is in the capital cities.”