Residential land prices have stabilised across Australia following two years of rapid growth, with median prices edging 0.2% lower during the September quarter last year.
HIA and CoreLogic found the median lot price declined to $328,854 in Q3 2022, remaining relatively stable over the preceding two quarters.
New residential land sales also reached a new record low, with just 4,405 lots being sold during the same quarter.
“The stabilisation of the price of new residential land is a relief following a 26% increase in less than two years,” HIA Senior Economist Tom Devitt said.
“On a per square metre basis, prices fell even further as the desire for space and amenity that characterised the pandemic continued to push up the size of residential lots that Australians demand.
“This stabilisation of new residential land prices and falling sales volumes do not reflect an end to underlying shortages of land.
“Rather, they reflect a combination of worsening affordability and the shock of the RBA’s rate hiking cycle to consumer confidence and borrowing capacity.
Devitt said declining prices, together with record low sales volumes, were disguising the underlying shortage of land in the short term.
Sales volumes started plummeting two years ago when land prices were soaring, indicating a shortage of shovel ready land in the face of strong demand, he said.
Devitt said lower land prices and more affordable housing must be driven by a greater supply of land, shorter delivery times and fewer regulatory and tax imposts, not by the destruction of confidence.
“Given that much of the available land supply was consumed over the September Quarter and December Quarter 2020, when the HomeBuilder scheme increased demand for land, it’s unsurprising that land sales have continued to trend downwards to new record lows,” CoreLogic Economist Kaytlin Ezzy said.
“Similar declines have been seen through a number of construction metrics, including dwelling approvals, which have trended 10% below the decade average for the past six months, and dwelling commencements, which are tracking 32.4% below the peak recorded in June 2021.”
“While a 0.2% decline over the September Quarter 2022 is fairly mild, we would expect the price falls to accelerate in the coming months.”
Ezzy said Australia’s residential land market typically followed the established dwelling market, which had fallen by 4.1% over the three months to September.
“Additional rate hikes, coupled with continually high construction costs, will add additional downward pressure on prices, with steeper declines expected in the December Quarter 2022, and into 2023,” she said.
HIA and CoreLogic track the sales activity of 51 housing markets across Australia, including the six state capital cities.