In its latest report, Housing Industry Association reveals that conditions in Australia’s residential land market continued to tighten during the December 2013 quarter.

The latest HIA-RP Data Residential Land Report provided by the Housing Industry Association, the voice of Australia’s residential building industry and RP Data, Australia’s leading property information analytics provider, shows that the total number of residential land sales declined by 1.8 per cent to 15,447 lots during the final quarter of 2013. This was the second consecutive quarter of declining activity in the land market while the median price rose by 4.2 per cent to the highest level on record.

Key markets such as Sydney, Brisbane and Perth all saw lower turnover during the final quarter of 2013, with transactions actually increasing in Melbourne, Adelaide and Hobart.

According to HIA Senior Economist, Shane Garrett, the latest figures add further to the evidence of serious supply issues in the residential land market. He commented that turnover in the market has declined for the second consecutive quarter while lot prices have shown significant increase at the same time.

Shane Garrett explains this is a sign that the supply of residential building land is starting to fall behind the demand for new homes. Warning that the upturn in residential building, which has much to contribute to overall economic growth, risks being brought to a halt by inadequate land provision, Shane Garrett said policy makers have to act quickly to ensure that the supply of land is boosted; doing so will greatly improve the chances of sustaining the recovery in residential construction.

Shane Garrett adds that new home building offers the possibility for some economic good news this year; it is therefore important that land supply policies act in concert with broader economic objectives.

RP Data’s research director Tim Lawless commented that the combined stimulus of low interest rates together with Government grants for newly constructed housing is clearly stoking demand across the vacant land sector at a time when land sales are trending lower. Considering that the number of house and unit sales rose by almost 8 per cent over the December quarter and were up by 18 per cent compared with a year ago, the slowdown in land sales over the second half of 2013 is counter to broader housing market trends.

During the December 2013 quarter, the weighted median residential land value for Australia’s six state capitals increased by 3.5 per cent to $326,184, representing a 22.3 per cent increase on the final quarter of 2012. The median value for Regional Australia was $160,886, representing a quarterly rise of 2.1 per cent and an annual increase of 3.6 per cent.

Higher land prices in the capital cities were driven by developments in Melbourne, Adelaide and Perth. However, Sydney and Brisbane land prices were flat during the quarter, and land prices in Hobart saw a decline during the quarter.