Relief as vacant land prices on way down

A report shows that the price of land is now falling in most ­markets.

Sydney prices have fallen the most over the 12 months to June, with the rate per square metre of vacant land down 12.6 per cent.

The shortage of residential land has been a major factor in driving house prices up over the past decade, with the cost of new residential land per square metre doubling in Sydney and reaching even greater multiples in Melbourne.

But the latest Residential Land Report — capturing data from 46 markets nationally, including the six state capital cities — from the Housing Industry Association and CoreLogic shows the price of land is now falling in most ­markets.

Sydney prices have fallen the most over the 12 months to June this year, with the rate per square metre of vacant land down 12.6 per cent.

Adelaide followed with a decrease of 12 per cent, while Melbourne and Brisbane had single-digit falls of 7.6 per cent and 4.6 per cent, respectively.

HIA economist Angela Lillicrap said the falls followed general market trends.

“Partially, the fall is due to the whole market downturn and supply and demand,” Ms Lillicrap said. “We don’t expect land prices to increase dramatically (over the next year), but we also don’t expect them to continue to decline.”

CoreLogic’s head of Australian research, Tim Lawless, said falls should help improve affordability, particularly in Sydney and Melbourne. It is a different story in Hobart, where tight supply and strong demand has caused land prices to jump 20.3 per cent over the year to June.

Hobart reached the peak of the market earlier this year. But despite the significant rise, it still boasts the lowest median land price among the capital cities at $180,000 and the largest median land area at 624sq m.

Perth prices were also on the rise over the year to June, up 5.1 per cent per square metre.

Ms Lillicrap said land short­ages were one of the factors that had driven house prices to increase over the past decade, calling for greater regulatory action from government to improve ­affordability.

“The process of making land shovel-ready can often last a decade,” she said. “Therefore, responding to shortages cannot be met with increased supply in the short term. An adequate supply of land is required to avoid a deterioration in affordability.

“Governments must work with industry to ensure that there is an appropriate supply of land. Improving the monitoring and reporting of the land supply pipeline will enable government and industry to make well-informed decisions.”