Land is the largest and most expensive component of every newly-built home – both greenfield and infill. In Sydney, almost 60 per cent of the ticket price of a new detached house is made up of land costs. The land component is also very substantial in all other large Australian housing markets. The results from our latest residential land report show why.
The second edition for the year of the HIA-CoreLogic Residential Land Report has now been released. As Australia’s most comprehensive regular review of developments in the market for residential land, the report provides a wealth of data relating to land prices, lot sizes and transaction volume in 47 regions around Australia – including six of the eight capital cities.
Over the past ten years, the typical lot price in Sydney has increased from $270,000 to $467,500. Melbourne lot prices have more than doubled from $148,500 to $359,000 in the past decade. As well as becoming significantly more expensive, land lots have also been getting steadily smaller.
The typical Sydney lot size has fallen from 555 square metres ten years ago to 480 square metres today. Over the same time period new residential lots in Melbourne have declined from 530 square metres to 448 square metres. The big uplifts in house prices in these markets over the past six years have been driven by land price pressures. In contrast, construction costs have only risen in line with general price inflation.
So why has the increase in land prices been so unrelenting? Unlike other items in the economy, the land supply tap is not easy to adjust in response to the ebb and flow of demand for new housing.