House being built

Land shortages driving prices to new records.

The median price of a residential block of land has hit new records due to shortages on land, the HIA has found. According to the HIA-CoreLogic Residential Land Report, the national median price of a residential block of land has hit $340,000 as of the September quarter 2023, reaching a new record high. Housing Industry Association (HIA) senior economist Tom Devitt has said this figure represents a new record high, increasing by "more than a quarter compared to before the pandemic". Mr Devitt stated that shortages of "shovel-ready land" resulted in price surges for lots during the COVID-19 pandemic, while the volume of lots being sold has "plummeted to 20-year lows".

"This ties in with other data showing the number of homes commencing construction is also lower than at any point in the last decade. "Alleviating the housing shortages in Australia will require a supply-driven approach, and National Cabinet's ambition to build 1.2 million well-located homes in five years is a step in the right direction," Mr Devitt said. Indeed, the HIA recently welcomed the announcement by federal, state, and territory governments to the commitment of 1.2 million homes, however, HIA managing director Jocelyn Martin said further changes to tax settings is acting as "a significant deterrent to productivity and increasing housing supply". Mr Devitt continued: "It would further require the release of more shovel-ready residential land into the market, which the data suggests has fallen to levels inconsistent with required levels of home building.

"Delivering the infrastructure needed to get more residential land remains a chokepoint, with developer contribution charges acting as a tax on new housing, compounding other taxes and regulatory constraints on home building." Adding to this, CoreLogic economist Kaytlin Ezzy said the ongoing land price increases, in spite of higher interest rates, affordability constraints, and "recessionary low levels of consumer sentiment", have indicated "just how constrained the supply of shovel-ready land is". "The government's plan to provide 1.2 million new homes within five years is already an ambitious goal and would exceed the current record for five-year completions, recorded over the five years to December 2019 (1.045 million), by almost 15 per cent.

"While the growth trend in construction costs appears to be normalising, helping to provide assurance for builders and potential new home buyers, without a sufficient and consistent release of shovel-ready land, it will be an increasingly difficult goal to achieve," Ms Ezzy concluded.