It'll take some time before land supply recovers, economist says
The volume of residential land transactions has plunged 37% over the 12 months to March, ensuring a sharp decline in the volume of new homes commencing in 2024.
This was according to the HIA-CoreLogic Residential Report, which provides updated information on sales activity in 51 housing markets across Australia, including the six state capital cities.
Tom Devitt (pictured above), HIA senior economist, said an acute shortage of available land has seen the median lot price surge by 23% over the three years from March 2020 to March 2023 – a massive jump compared to the more modest 5.1% lift in the three years prior to that.
“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 said.
“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. 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.”
The HIA economist said it takes 10 years on average to move land through the seven stages of land release, which meant decisions made today about land release would likely impact housing supply in a decade’s time.
“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” Devitt said.
Kaytlin Ezzy, CoreLogic economist, said a shortfall in available land supply has resulted in the overall resilience of land prices overall – this despite the rate tightening cycle resulting in some capitals recording mild declines in recent months.
“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,” Ezzy said. “Until then, we can expect land prices will remain elevated, dwelling approvals will continue to track below average, and house commencements will continue easing.”
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