According to the latest HIA-Cotality Residential Land Report, residential land prices have skyrocketed, increasing by more than 500% since the year 2000. In contrast, construction and skilled labor expenses have seen a 150% rise over the same timeframe.
HIA’s Chief Economist Tim Reardon highlighted this disparity, stating, “In the past 25 years, the cost of a typical new residential lot has grown over three times more rapidly than construction costs.”
Reardon emphasized that the primary driver of this long-term surge in housing expenses is the rising cost of land.
He attributed these increases to the government’s approach in managing the release, servicing, and taxation of land, which embeds the cost of infrastructure, delays, and planning decisions into land prices.
“These costs are upfront and become part of the land’s value, ultimately impacting new home buyers,” Reardon explained.
The report, released today, also reveals that the median price of residential land surged again in the September quarter, reaching a new record high across the nation. This figure represents an increase of over 10% within the year, growing at approximately three times the rate of consumer price inflation.
Reardon said the country had lost sight of this “most pressing constraint” on new home construction, given the huge pressure on all sectors since the COVID-19 pandemic.
“The shortage of shovel-ready land is central to solving the affordability challenge,” he said.
“In just the last year, residential lot prices in Brisbane and Perth increased by 18 per cent and 21 per cent respectively, while Adelaide prices jumped a whopping 40 per cent.”
Reardon warned that unless the problem was resolved, demand would continue to grow for established housing, pushing prices even further up.
Cotality research director Tim Lawless also said construction costs had grown persistently.
“The cost to build a house rose another 1 per cent in the December quarter, pushing building costs more than 30 per cent higher over the past five years,” he said.
Lawless said these high costs also contributed to inflation – which, in turn, has triggered the high interest rates bleeding mortgage-holders dry.
“The cost of new dwellings purchased by owner-occupiers, which has the largest weight in the CPI calculation, was up three per cent in the December CPI, adding to renewed cost of living pressures,” Lawless said.
“With land costs and building costs continuing to trend higher, along with high contribution charges and taxes, project feasibility remain a core challenge for builders and developers in delivering desperately needed housing supply.”
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