New residential land sales fell in Q3 2022 despite price declines

Tom Devitt, Housing Industry Association (HIA) senior economist, said the latest figures remained relatively stable with those recorded in the previous two quarters. He added that “the stabilisation of the price of new residential land is a relief following a 26 per cent increase in less than two years”.

Sydney’s landowners ask the highest median price for a lot of land — $614,500 — more than twice as much as Brisbane’s $240,000 — the lowest asking price across the country, as the weighted median price of residential land in Australia’s capital cities hit $342,072.

Victoria’s Mornington Peninsula region is the most expensive regional market to purchase land in, with lots going for a median price of $1,010,000. 

He revealed that “on a per-square-metre basis, prices fell even further as the desire for space and amenity that characterised the pandemic continued to push up the size of residential lots that Australians demand”. 

Hobart boasts the largest median lot size at 670 square metres, while Perth possesses the smallest — 375 square metres. Broadly speaking, the capital city weighted median lot size was 453 square metres, the highest since 2013.

The report found just 4,405 residential lots were sold in the three months to last September, a record low for the sector, though these falls, coupled with the stabilisation of prices, “do not reflect an end to underlying shortages of land”.

Mr Devitt outlined that these factors “reflect a combination of worsening affordability and the shock of the RBA’s rate hiking cycle to consumer confidence and borrowing capacity”.

“Sales volumes started plummeting two years ago, when land prices were soaring. This is strongly indicative of a shortage of shovel-ready land in the face of strong demand,” he said. 

In his estimation, a demand recovery is dependent on the RBA’s future cash rate decisions, which kick off on Tuesday, 7 February. Once this heals, Mr Devitt said that “the underlying shortage of shovel-ready land will further exacerbate the affordability challenges already facing aspiring home owners and renters”.

CoreLogic economist Kaytlin Ezzy expressed unsurprise that land sales had continued to trend downwards towards record lows as most of Australia’s available land was consumed in the September and December quarters of 2020 when the HomeBuilder scheme caused soaring demand. 

She added that “similar declines have been seen through a number of construction metrics, including dwelling approvals, which have trended 10 per cent below the decade average for the past six months”. 

Despite labelling the declines as “fairly mild”, Ms Ezzy did tender her expectation for “the price falls to accelerate in the coming months” — a forecast further supported by the fact “Australia’s residential land market typically follows the established dwelling market, which fell by 4.1 per cent over the three months to September”. 

She concluded: “Additional rate hikes, coupled with continually high construction costs, will add additional downward pressure on prices, with steeper declines expected in the December quarter 2022 and into 2023.”