Supply-side squeeze forces record lot prices

ScreenHunter_18 Jul. 05 10.22

By Leith van Onselen

The Housing Industry Association (HIA) has released its latest Residential Land Report, which reveals that median vacant lot price across Australia hit a record $205,248 as at March 2014 after rising by 2.0% over the quarter (see next chart).

ScreenHunter_3349 Jul. 17 11.16

Residential lot sales also continue to trend lower, with the number of sales declining 4.7% in the year to March 2014.

According to the HIA, supply-side bottlenecks are once again starting to bite, brought about by the usual culprits: inadequate land release, cumbersome planning approval processes, and excessive taxes and charges on development:

“The upward trajectory for residential land prices since mid-last year is steeper than it should be. There is clearly a policy failure this cycle, as in many before it, to ensure a supply of shovel-ready land commensurate with the demand for new housing,” concluded Harley Dale.

Meanwhile, the RBA’s plans for housing to fill the hole left as the mining boom unwinds could take a hit, according to the HIA:

“There is a close relationship between residential land sales and detached house starts. The indication is that the upcycle in detached housing will peak during 2014,” said HIA Chief Economist, Harley Dale.

RP Data agrees:

According to RP Data’s research director, Tim Lawless, the early peak in land sales is likely to dampen expectations that investment in new housing construction will help to support Australia’s economic transition away from resources related infrastructure projects. “Policy makers were placing a great deal of importance on renewed levels of housing construction to act as a new pillar for economic expansion. While there has been uplift in approvals and new housing starts, the trend towards fewer land sales since September last year suggests that the housing construction cycle, at least for detached housing, is close to peaking.”

“The ongoing rise in land prices at a time when sales are falling is a worry…

When will Australia learn?

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Leith van Onselen
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Comments

  1. My, the HIA has changed its spots. We have observed it placing landbanker interests above honest builders for a very long time.

    Rising prices on falling volumes is a red flag, as any sharemarket investor knows.

    Beware!

    • hey dc – out of interest (don’t have equities background), can you expalin the phenomenon of rising prices on falling volumes?

      thanks

      • nexus789MEMBER

        A potential signal from a market – rising volume is associated with large investors buying and selling in a market, so when the market is rising on increasing volume it is assumed the big players and the “smart money”, is buying. When the market is rising while volume is declining an observation is that the smart money is not the one buying anymore and they are exiting their positions.

    • We have observed it placing landbanker interests above honest builders for a very long time.

      Calling for a greater supply of land is consistent with that position, provided that “supply” refers to the position of the UGB and “landbankers” include those who hold call options on land outside the current UGB.

      Given the conflicting interests of landbankers and builders, the HIA must always talk out both sides of its mouth.

    • Hugh Pavletich

      David Collyer … it is well past time the HIA woke up … representing its members and the wider public interests … and stopped being parrots for the land-bankers.

  2. Have you ever noticed that they are always revising their prices down the next quarter?

    The national median was report in the Dec 13 quarter to be $235,979 at the first release and it is now reported as $228,298.
    It gets a headline of demand is up every time but then is revised the next quarter to show that prices have gone up again.

  3. Ha ha ha ha! Like I say way too often, FULL RETARD! Go Australia!

    Check this out… you can buy nice 3 bedroom homes in Denver, Colorado for below 270k, less than 20 minutes from downtown, near Regis university.

    http://www.zillow.com/homedetails/5117-Newton-St-Denver-CO-80221/13293161_zpid/

    And this ain’t Detroit either. Denver’s unemployment rate is 5.8%. It’s a nice place. Nearby Boulder, CO has an unemployment rate below 5%.

    Want to go somewhere more downmarket? There are houses for under $200k in areas further out.

    Seriously though, laughing at ‘teh ‘strayan stupid’ is becoming tiring. My 2 month old daughter’s US passport arrived in the mail a couple of days ago. Reckon I’ll get my employer to get me onto the green-card track next visa renewal, then I can go from laughing at Australia to simply ignoring it (like the rest of the world does).

    There is something seriously wrong with that country. It went from possibly the best country in the world to a mediocre and declining country in less than 20 years.

    I used to want to move back there… now the place just seems really unattractive.

    • Lord Dudley, if you check the Demographia median multiples and look at RE sites for the cities with median multiples of 3, like many of our cities used to be like, you will find similar and even better examples than the one you gave.

      Housing USED to be this fairly priced in our cities too.

      • GunnamattaMEMBER

        You got a link for that Phil? I would be interested to know which cities are goers.