An unusually sharp rise in the price of residential land indicates the supply of land is not keeping up with new demand that has emerged during the pandemic according to HIA senior economist, Nick Ward.

The HIA-CoreLogic Residential Land Report provides updated information on sales activity in 51 housing markets across Australia, including the six state capital cities.

“Over the year to the March Quarter 2022, median lot prices increased by 19.7%. This is not a normal increase – it is the strongest annual growth rate since 2004,” Nick says.

“Constrained land supply will limit housing activity in Greenfield areas from mid-2023 onwards.

“New data released by the ABS on demolitions suggests that knock-down rebuilds and small redevelopments are around 25% of the market for house and townhouse builders in New South Wales. Encouragingly, this segment of the market appears to be growing rapidly, creating new opportunities for the industry,” added Mr Ward

CoreLogic economist, Kaytlin Ezzy, says that the scarcity of available residential land continues to be a driving factor across Australian land markets, with land prices surging at a time when the number of lots sold is declining: “While increasing interest rates, rising construction costs and increased uncertainty, particularly across the building industry, has likely smothered some land demand, the surge in land prices suggests that those that want to build are finding it difficult to secure lots.

“With land often taking more than a decade to move through the development pipeline, it’s unlikely we’ll see any material change in land supply for some time.”