According to the latest HIA – Core Logic RP Data Residential Land Report, the number of residential land sales fell by 11.8% over the year to the December 2014 quarter. This is at odds with the weighted median residential land value, which increased by 2.8% in the December 2014 quarter – to be up by 6.3% over the year.
Commentators believe that the increase in the weighted median value was driven primarily by Sydney, with significant growth also evident for Perth and Melbourne. As with all usual housing cycles, there are wide divergences in land market conditions around the country. This is clearly evident across the 6 capital cities and 41 regional areas covered in the Residential Land Report.
The price of residential land per square metre has increased in Sydney, Melbourne and Perth in the December 2014 quarter, with Sydney remaining the country’s most expensive land market by some considerable margin.
Importantly, for us South-East Queenslanders, the most extensive residential land markets are on the Gold Coast, the Sunshine Coast and the New South Wales Richmond/Tweed region.
According to Core Logic RP Data Research Director Tim Lawless, the number of vacant residential land sales have been trending lower since mid-2013 and concurrently the median land price has been rising to new record heights. Tim Lawless mentioned that the opposing trends are a clear sign that demand is outweighing supply, which is pushing land prices higher. Higher land prices ultimately lead to less affordable homes – it is the high cost of vacant land which significantly contributes to the increase in cost of housing.
Ideally, we should be seeing more land brought to the market and sold during this period of low borrowing costs. In South-East Queensland we have seen a massive spike in demand for master planned residential housing communities, with aggressive uptake by the major institutional players in this space.
Where to from here? Will the market overcook and will demand outstrip supply? Indications are that this squeeze will continue to accelerate over the next 18 months.
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