The most recent land sales data confirms that new home building will remain weak for the remainder of the calendar year.
According to the HIA – RP Data Residential Land Report, land sales levels remain historically low, despite an increase in the March quarter.
“The March quarter saw a 6.8 per cent increase in land sales and it’s encouraging that the improvement was broadly-based across the states. With the exception of Adelaide, all the capital cities saw increases in the number of residential lots sold,” HIA senior economist Andrew Harvey said.
“However, the overall level of sales remains low in an historical context and we will need to see more quarters of growth to infer anything other than the possibility that sales volumes are merely bouncing along the bottom of a deep trough.
“The new home building sector continues to face highly challenging business conditions and the prolonged period of weak land sales doesn’t provide any confidence that a recovery is on the near horizon. Meaningful reforms across all levels of government are urgently needed to address the persistent weakness in residential building.”
According to RP Data’s research director Tim Lawless, it is positive to see sales improving, although volumes remain well down on normal levels.
“We have seen transactions for vacant land rise over two successive quarters now, however this lift comes from a historically low base. To put the number of land sales over the March quarter into perspective, transactions are about half of what we saw over the September quarter of 2009,” he said.
“Considering mortgage rates have moved about 55 basis points lower since March it is possible we may see a continuation in this trend of improving buyer activity but we have a long way to go before land sales get back to what might be described as normal levels.”
According to Mr Lawless, one of the barriers that may be stifling demand for vacant land is the fact that land prices haven’t seen any sort of correction like what was recorded across the established housing market.
Median land prices have risen by close to 1 per cent over the year nationally and by 3.5 per cent across the capital cities.
“Consumers are very budget conscious and the lower price points associated with established housing or unit developments may be pulling prospective buyers away from the new home and land market,” Mr Lawless said.