A report has shown that demand for residential land is continuing to fall, having charted a new record low for land sales in the March quarter.
According to HIA chief economist Tim Reardon, the fall in sales can be attributed to the decline in demand for new homes and the housing market downturn of the last two years. However, it may compound Australia’s lengthy struggle with property affordability yet further.
Reardon explained, “A shortage of land is one of the factors that have driven home prices to increase over the past decade. An adequate supply of land is required to avoid a deterioration in affordability."
Despite the decreased demand, land prices have continued to increase, continuing the cycle.
“While the volume of sales decreased considerably, this was not reflected in the change in the median price of land. Nationally, the weighted median price increased by 0.9% in the March 2019 quarter compared to the December 2018 quarter,” said Reardon.
Tim Lawless, CoreLogic research director, expressed concern over the diminished sales even during a time of strong population growth, calling on policymakers to address the disparity.
He said, “Well located, developable land remains in short supply which has pushed the price of vacant land higher over the long term, adding to affordability challenges and a reduction in lot sizes.”
However, Lawless did express cautious optimism that the trajectory of vacant land prices could change before the year’s end.
“More recently, housing credit and housing prices have shown signs of stabilising. CoreLogic data to June reported a subtle monthly rise in housing values across Sydney and Melbourne. With interest rates potentially heading even lower and housing demand via population growth remaining high, we could potentially start to see some upwards pressure on vacant land prices over the second half of 2019,” he said.