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The cost and supply of land must improve for the Albanese government to fulfil its promise of 1 million new homes, an HIA economist says.
According to Housing Industry Association (HIA) senior economist, Nick Ward, land prices during the June quarter of 2022 rose by 15.4 per cent, making it the fastest rate of annual growth since 2004 when excluding the prior two quarters.
The latest HIA-CoreLogic Residential Land Report revealed that the median lot price for residential land by $44,130 between the June quarter 2021 and the June quarter 2022.
The report stated that this increase was associated with a significant increase in lot sizes, which rose by 12.6 per cent between the June quarters of 2021 and 2022.
Furthermore, the Greater Sydney and Greater Melbourne regions saw sales volumes decrease in relation to other regions, which has resulted in the national average lot size being pushed upwards.
In addition, price growth eased during the June 2022 quarter, increasing the median lot price by 1 per cent when compared to previous quarters, with the number of sales continuing to decline during this quarter.
The report suggests that further increases in the RBA’s cash rate will “further constrain consumers’ ability to purchase land” and may result in fewer new homes being built over the next few years.
HIA’s forecasts suggested that for the federal government’s “aspirational goal” of building 1 million homes over five years starting in 2024, there must be changes to the cost of building or the price of land for the government to successfully reach that target.
The report stated there could be an increase to the supply of new homes if land supply increases, along with shorter delivery times and fewer regulator and tax imposts.
Mr Ward stated: “Prices appear to have risen close to consumer’s capacity to purchase land.
“The increases in the cash rate will likely further constrain consumer’s ability to buy, risking a reduction in the number of homes expected to be built.
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“In order to achieve the Australian government’s target of building one million new homes over five years from 2024, the supply of land will need to improve in the near future and the cost decline.”
CoreLogic economist Kaytlin Ezzy stated the government’s target of 1 million new homes is “an ambitious one, especially given current land supply”.
“While the interest rate rises seen over the past six months will have put some downwards pressure on land prices, until there is a material change in supply, median land prices will likely remain elevated,” Ms Ezzy said.
[RELATED: Rate increases’ ‘full impact’ will be felt mid-2023: HIA]
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