The Housing Industry Association and RP Data have released the new HIA-RP
Data Residential Land Report, which indicates land price pressures and an
approaching peak in detached house starts. The Housing Industry Association
(HIA) represents Australia’s residential building industry, while RP Data is
Australia’s leading property information analytics provider.
HIA Chief Economist, Harley Dale explains that there is a close
relationship between residential land sales and detached house starts with
findings indicating that the upcycle in detached housing will peak during 2014.
The multi-unit segment will play an important swing variable role in determining
the eventual magnitude and duration of the current new home construction cycle.
According to Harley Dale, on the price side of the land equation,
acceleration in the growth rate for capital cities in the March 2014 quarter is
of concern as the climb in residential land prices since mid-last year is
steeper than it should be. He attributes this to a clear policy failure to
ensure a supply of suitable land commensurate with the demand for new housing.
The report also indicates a decline of 4.7 per cent in residential land
sales between the March 2013 and March 2014 quarters. Over the six months to
March 2014, residential land sales were still up by 5.9 per cent when compared
to the six-month period to March 2013. The weighted median price of residential
lots in the March 2014 quarter increased by 2.0 per cent to $205,248, marking
only the second time the value has exceeded the $200,000 threshold. Capital
city lot prices increased by 3.3 per cent in the quarter to be up by 7.5 per
cent over the March 2013 quarter, while lot prices in Regional Australia eased
by 0.7 per cent in the same period to be up by 2.4 per cent in annual terms.
RP Data’s research director, Tim Lawless commented that the early peak
in land sales is likely to lower expectations that investment in new housing
construction will help to support Australia’s economic transition away from
resources related infrastructure projects. Despite the increase in approvals
and new housing starts, fewer land sales since September last year suggest that
the housing construction cycle, at least for detached housing, is close to
Mr Lawless added that the ongoing rise in land prices at a time of
falling sales is worrisome, particularly in Sydney where the number of sales
over the March quarter was almost on par with the previous year but the median
price of land has moved 5.6% higher over the year.