Land shortages are behind the housing crisis gripping Australia
Residential land transactions are dropping while the price of land balloons to new highs. Image: Canva.
  • Land shortages are preventing new homes from reaching the market.
  • Residential land transactions have plummeted over the last year.
  • On average it takes ten years to move land through the seven stages of land release.

The housing crisis in Australia is being driven by a shortage of land, according to the newest Housing Industry Association (HIA)-CoreLogic Residential Land Report.

The report relays the latest information regarding sales activity in 51 housing markets nationwide, including the six capital cities.

Accordingly, the report found that land prices have been growing despite historic interest rate rises. Moreover, the current scarcity of land for property development poses a considerable roadblock to the supply of new homes in the upcoming year.

Land transactions plummeting, prices skyrocketing

“The volume of residential land transactions has fallen 37% over the 12 months to March 2023. This will see the volume of new home commencements slow over the next year,” says HIA senior economist, Tom Devitt.

“An acute shortage of available land saw the price increase by 23% over the three years from March 2020 to March 2023. This compares to just a 5% increase in the three years before that.”

Tom Devitt, HIA

Indeed, lot sales have dropped throughout urban and rural areas. 36 of the 51 regions examined in the report saw a dip in sales volumes over the previous year.

Consequently, prices climbed upwards in 37 regions last year, with all capital cities recording a rise in median lot prices, a first in almost a decade.

“This land shortage continues to drive up prices despite the sharpest increase in interest rates in over 30 years and will weigh on home building activity in the coming years,” Devitt adds.

A decade from dirt to dwelling

As the market begins to normalise from the shocks in recent years, it is expected that both sales and prices will return to their historical trend, says Devitt.

“This depends on the government’s ability to adequately plan its land release pipeline, which in turn depends on the availability of data across all stages of land release.”

Devitt noted that it takes an average of ten years to move land through the seven stages of land release. The seven stages are:

Category Stage number

Stage description

Planning 1 Designated for development
2 Zoned for development
Approvals 3 Planning approval
4 Works approval
5 Completion approval
6 Title registration
Lot sales 7 Lots sold

Source: HIA-CoreLogic Residential Land Report.

“Decisions made today about land release can be expected to affect housing supply ten years from now.

“The time it takes to progress from a vacant block of land to a block that is shovel-ready with titles could be a major roadblock to the government’s plan to build a million homes over the next five years.”

Supply and demand mismatch driving land price increase

CoreLogic economist, Kaytlin Ezzy, observed that while the rate tightening cycle had a mild impact on some capitals, land prices, overall, have remained fairly resilient, due to the shortfall in available land supply.

“While sales numbers have eased significantly from the peak volumes seen during the HomeBuilder scheme, it will take some time before we see a more notable recovery in supply levels. Until then, we can expect land prices will remain elevated, dwelling approvals will continue to track below average, and house commencements will continue easing,” said Ezzy.

Sydney remains the most expensive capital city, where median land prices are $1,827 per square metre (sqm). Additionally, Sydney prices have grown at a rate that far outpaced its counterparts. The cost of a lot in Sydney per sqm is 94% greater than the average of all capital cities. A decade ago, the price was only 19% higher.

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