Surging land costs threaten housing supply targets in key cities
The cost of residential land in Australia’s most affordable capitals has increased significantly, with new figures indicating daily price rises of more than $200 in some cities.
According to the Housing Institute of Australia, the median price of residential land across the country rose by 6.8% in the last financial year, outpacing the growth recorded in the consumer price index.
The increase has been particularly pronounced in Perth, where the median price climbed by $235 per day, representing a 29.8% annual rise. This equates to an increase of over $86,000, bringing Perth’s median land price to $375,000—just $7,500 less than Melbourne.
Hobart has also experienced notable growth, with land prices rising by $150 per day, or 20.8% over the year. The median price for a block in the Tasmanian capital now stands at a record $320,000.
Brisbane has overtaken Melbourne as the country’s second most expensive land market, following a 9.2% annual increase that added $92 per day to the median price. The typical lot in Brisbane now costs $366,300.
Adelaide remains the most affordable state capital for land, despite an 8.2% increase that lifted the median price to $292,000. However, the average block size has decreased, resulting in a 27.6% rise in the price per square metre.
Melbourne and Sydney recorded smaller increases. Sydney’s median land price rose by $51 per day (2.8%) to reach $689,500, while Melbourne’s increased by $20 per day (2%) to $382,500. Brisbane’s growth means it is now the second most expensive capital for land, behind Sydney.
The trend has raised concerns about the nation’s ability to address its ongoing housing shortage.
“Strong population dynamics have driven the strongest improvements in home building activity,” said Tim Reardon (pictured right), chief economist at the Housing Institute of Australia. “Unfortunately, it is also producing some of the fastest increases in lot prices in the nation.
“If this continues, the competitive advantage that these states hold with lower land prices attracting new residents, will be lost relatively quickly.”
Reardon also noted that government targets for new housing construction would be difficult to achieve without measures to lower land costs. He suggested that reducing infrastructure costs for developers, taking on those costs directly, or changing taxation could help address the issue.
“A failure to provide sufficient residential land, and associated infrastructure, will limit improvement in home building volumes,” he said. “The return of demand for new housing, especially as borrowing costs have fallen, will be increasingly diverted into the established housing market, driving up prices and worsening the affordability crisis.”
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