A new report has found that surging lot prices are having an unexpected flow-on effect.
The insight, from a joint HIA-CoreLogic report, found that median lot prices increased by 19.7 per cent in the March quarter of 2022, this is the biggest annual growth rate since 2004.
According to the analysis, this price growth, combined with constrained supply, means there won’t be enough land in the greenfield zones to build homes after mid-2023.
Senior economist at the HIA, Nick Ward, stated, “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.”
To coincide with this report, ABS recently released more information about demolitions, showing that about 25 per cent of the market for builders of houses and townhouses in NSW is made up of minor redevelopments and knockdown rebuilds.
Mr Ward added that this market segment appears to be expanding swiftly, offering new potential for the business, which is encouraging.
According to CoreLogic economist Kaytlin Ezzy, “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.”
Ms Ezzy continued, “While increasing interest rates, rising construction costs and increased uncertainty, particularly across the building industry, have 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,” she concluded.
Article source: www.smartpropertyinvestment.com.au
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