HIA Senior Economist Nick Ward says the federal government will need the supply of land to improve soon in order to reach its target of building one million new homes over five years.
Last month, the federal government struck a National Housing Accord to address Australia’s housing shortage, as well as delivering $350 million in additional funding to the issue.
The commitment comes as land prices continue to march higher across the country.
HIA and CoreLogic research found that land prices increased 15.4% over the year to the June Quarter 2022 – the fastest rate of annual growth since 2004 (excluding the prior two quarters).
“Prices appear to have risen close to consumer’s capacity to purchase land,” Ward said.
“The increases in the cash rate will likely further constrain consumer’s ability to buy, risking a reduction in the number of homes expected to be built.
“In order to achieve the Australian government’s target of building one million new homes over five years from 2024, the supply of land will need to improve in the near future and the cost decline.”
CoreLogic Economist Kaytlin Ezzy said the government’s goal to complete one million new homes was an ambitious one, despite about 975,000 homes being completed over the five years to June 2022.
“While the interest rate rises seen over the past six months will have put some downwards pressure on land prices, until there is a material change in supply, median land prices will likely remain elevated,” Ezzy said.
Earlier this month, HIA found that new home sales across the country fell by 22.8% in October, with the weight of increases in the cash rate slowing building activity.
Last month, Australia’s housing market downturn became more widespread, with four in five house and unit markets across the capital cities recording a fall in values in the recent September quarter.
CoreLogic found that almost 80% or 2,405 house and unit markets analysed saw values go backwards over the three months to September, a significant increase on Q2, when just 1,293 markets recorded a decline.