Lack of land sales holding up new home building in Australia

New home building in Australia in 2013 is likely to fall short of what is needed as land sales are well below requirements, a new report suggests. The 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 and analytics provider, says there is only a gradual recovery in residential land sales.

There was a 13.6% increase in residential land sales in the December 2012 quarter and that comes on top of a 20% drop in the previous quarter of the year. The findings of the latest land report are consistent with HIA’s forecast for a recovery in new residential construction in New South Wales and Western Australia in 2013, but modest to no positive action elsewhere, according to Harley Dale, HIA chief economist.

‘Furthermore, evidence of emerging land price pressures in Sydney and Perth highlight the importance of ensuring both a timely flow of readily available land and the pursuit of other policy reforms to reduce the excessive cost component to land supply,’ he explained. ‘There has recently been a further tightening in credit conditions for residential development. At the same time the excessive and inefficient taxes levied on new housing, much of which is embedded in serviceable land costs, is continuing largely unabated,’ he pointed out.

‘Given this dynamic is hindering Australia’s economic performance as well as prolonging considerable pain within the industry, one would hope it is a prominent focus for policy makers across all levels of government,’ he added.

Quote from PropertyCommunity.com : “New home sales in Australia fell to a 15 year low in August and more interest rate cuts are needed to boost the residential property sector it is claimed. The latest figures show that sales of new properties fell 5.3% in August.”

According to RP Data’s research director Tim Lawless, the increase in land sales over the final quarter of 2012 is an encouraging sign, however there is not yet a trend of consistent recovery emerging in the number of land sales.

‘The lift in land sales over the December 2012 quarter hasn’t quite recovered the fall away in sales recorded over the previous quarter and, overall, the number of land sales remain well below average. That is particularly the case for vacant land markets outside of New South Wales and Western Australia where the number of sales remained subdued over the December quarter,’ he explained. ‘The broader housing market has seen a strong start to the year in 2013, with dwelling values rising 2.8% over the first three months of the year. Transaction volumes for dwellings have also been showing a consistent improvement. Hopefully that implies that we should see another quarter of higher vacant land sales when the data becomes available in three months time,’ said Lawless.

He added that while land sales remain historically low, the median sale price for vacant land across the capital cities and nationally is at a record high. In the December 2012 quarter the weighted median residential land value in Australia increased by 1.2% to $195,866, some 1.7% higher than in the same period in 2011. The median value for capital cities increased by 1.8% in the December 2012 quarter to $223,085, some 2.9% higher than in the December 2011 quarter. The median value for regional Australia was $154,370 in the December 2012 quarter. This represents a quarterly decline of 0.2% and a 0.9% decline compared with the same period in 2011.