by Cameron Kusher on April 20, 2012 in Housing affordability, Housing supply, Research
The Housing Industry Association (HIA) in association with RP Data released the December 2011 quarter Residential Land Report this week and it made for pretty sobering reading. As the report states, over the past five quarters land sales have bounced around the bottom rather than showing any sign of improvement. Over the quarter, residential land sales across the six mainland states fell by 0.8% with 10,479 sales. The level of sales activity over the December quarter was 2.7% lower than over the previous year.
Despite the fact that there was no improvement in sales activity for residential land, values have continued to rise over the quarter. The weighted median residential land price increased by 1.7% over the quarter to $193,171 and across the capital cities, the increase was larger at 2.8% for the quarter.
Across the capital city markets analysed, median prices increased over the December 2011 quarter in each market except for Melbourne where they fell by -1.1%. Across the other capitals the quarterly increases were largest in Adelaide (14.1%) followed by Brisbane (3.9%), Hobart (3.8%), Sydney (3.6%) and Perth (3.1%).
Hobart had the highest median lot size of the capital cities analysed over the quarter at 665m2 while median lot sizes in Adelaide were the lowest at 375m2. Based on the median land price and median land size, vacant land in Sydney is the most expensive on a rate/m2 basis at $533m2, slightly higher than Perth ($527m2). On a rate/m2 basis, Hobart land enjoys a significant discount ($225m2) compared to other capital cities with Brisbane having the second cheapest value at $398m2.
Over the 10 years to December 2011, the rate/m2 on residential land has increased at a significant rate across each capital city. The compound growth rate over the past 10 years is detailed below for each city:
Interestingly, if you compare the compound growth rate for land prices over the period to growth in overall house values it appears that the land component is becoming much more expensive while the value of the house is becoming comparatively more affordable. Listed below are the ten year compound growth rates for capital city houses:
These figures lend weight to the argument that excessive charges on new development are inflating the cost of purchasing homes, particularly new homes. So too is the limited supply which is highlighted by the fact that although the volume of transactions has collapsed we continue to see an increase in the value of vacant residential land.
Overall, it looks as if the supply side constraints in the new land market are going to persist over 2012. Building approvals data which is available to February 2012 showed that the number of detached houses approved for construction (7,214) was at its lowest level since October 2011 and was -18.2% lower than the 10 year average level. As yet there has been no significant or sustained improvement in these figures, in fact they have been trending lower since the year 2000.
With successive interest rate cuts delivered in November and December of last year and probably more cuts to come over the coming months, we may see some improvement in the volume of transactions in 2012. However, despite the fact that volumes are at such low levels, median prices continue to rise highlighting that the limited supply is leading to increased prices. A supply side response is therefore likely to result in lower levels of growth in values or potentially a reduction in the price of vacant land.
Let me know what you think, what should or could be done to improve the affordability of vacant land?
Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.
Forum Rules:
The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.
Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.
Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.
This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.
Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ
Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy