Land value rises fuelled by undersupply


Land value rises fuelled by undersupply

Posted on Wednesday, April 22 2015 at 5:03 PM

Vacant sites are set to see price growth as demand continues to outstrip supply, according to one industry report.

Harley Dale, chief economist of the Housing Industry
Association (HIA), says the latest HIA-CoreLogic
RP Data Residential Land Report
signals increased price pressure.

“The number of residential land sales fell by 11.8 per cent
over the year to the December 2014 quarter,” he says.

“In contrast, the weighted median residential land value
increased by 2.8 per cent in the December 2014 quarter to be up by 6.3 per cent
over the year.”

Dale says an increase in the weighted median value is driven
primarily by Sydney, with significant growth also evident for Perth and

The pressure is, however, widespread.

“There’s insufficient shovel-ready land in some markets and
this is placing undue upward pressure on residential land values.

“Construction of detached houses looks to be peaking for the
cycle, but there’s unrealised demand out there because of that lack of readily
available and affordable land.”

Tim Lawless, research director at CoreLogic RP Data, says the
number of vacant residential land sales has been trending lower since mid-2013
and, concurrently, median land prices have been rising to new record highs.

“The opposing trends are a clear sign that demand is
outweighing supply, which is pushing land prices higher.

“Higher land prices ultimately lead to less affordable homes –
it’s the high cost of vacant land that significantly
contributes to the increasing cost of housing.”


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