Sydney buyers are being forced to pay premium prices for ever‑smaller parcels of land, as the city leads the nation in what The Daily Telegraph has dubbed “land shrinkflation,” drawing on new figures from the Housing Industry Association (HIA).
The latest HIA‑Cotality Residential Land Report shows the average Sydney lot has shrunk by 62sqm since 2015, even as the price per square metre has more than doubled over the decade, climbing from about $1,000 to $2,019. That’s roughly the amount of space you’d lose by carving off a compact inner‑city apartment or a decent‑sized backyard.
Greater Sydney’s median residential lot price hit $685,000 in the final quarter of 2025, up from $409,000 ten years earlier, underscoring how quickly land values have outpaced wages and household budgets. A headline‑grabbing example came with the $1.25 million sale of a 110sqm driveway in Newtown, highlighting how fiercely even slivers of inner‑city land are now contested.
HIA says the squeeze on affordability is being driven more by land than by building costs.
“Over the last 25 years, the price of the typical new residential lot of land has risen more than three times faster than construction costs,” said HIA chief economist Tim Reardon (pictured left).
“Since 2000, residential land prices have increased by more than 500%. Over the same period, construction costs and the price of skilled labour increased by around 150%. The long-run escalation in housing costs has been driven overwhelmingly by land.”
Cotality research director Tim Lawless (pictured right) said “persistent growth in construction costs is another factor in Australia’s housing shortfall and affordability challenges,” noting building costs are now more than 30% higher than five years ago.
With Sydney’s lot sizes having shrunk more than any other capital city and residential land sales more than halving over the decade, Reardon argues the shortage of shovel‑ready land is central to solving the affordability challenge. Without a steady pipeline of serviced, infrastructure‑ready sites, he warns renewed demand for new homes will be pushed back into the established market, driving prices even higher and deepening the housing crisis.
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