Land prices

The price of the average residential block of land has risen to a record high in the December quarter, a new survey says. The Housing Industry Association (HIA)-RP Data land residential report for the December quarter found the weighted median price of a vacant housing block increased by 2.2 per cent in the December quarter to $185,222.Over the year to December 2009, the weighted median land price rose by 14 per cent, the fastest annual rate since mid-2004, the report said. HIA chief economist Harley Dale said land values rose substantially quicker than building costs and the rate of inflation during the previous upturn in the housing cycle. Dr Dale said new house prices (excluding land) rose by an annual rate of 2.8 per cent in December 2009, building materials increased by one per cent, yet median land prices increased by 14 per cent."Only six months into a new home building recovery this situation is happening all over again," Dr Dale said."If this situation continues then the recovery will stall, the housing shortage will worsen, and there will be upward pressure on rents and on existing home values that could have been avoided."Sydney had the dearest median price of residential land in Australia, $275,000. This report has obviously not taken into consideration the ACT where land prices are well over $350,000.The cheapest market in Australia was the northern region of South Australia ($59,165), followed by Mallee in Victoria ($75,000).RPData.com national research director Tim Lawless said policy makers had to act to arrest the recent drop in the number of land sales."With Australia's population growing at a rapid rate and housing undersupply worsening we should be seeing land releases and consequent sales volumes rising not falling," Mr Lawless said."... without further construction of homes we are likely to see affordability worsen and more prospective buyers looking towards an already very tight rental market for their accommodation requirements."We believe that policy markers must act to provide additional residential land which affordable as well as being close to necessary amenities."