Land sales join booming property market

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HIA-CoreLogic has released its September quarter land sales report, which reveals a strong 46% increase in sales volumes from their record low in the March 2019 quarter:

Residential lot sales across Australia have increased by 45.9 per cent from their record low in the March 2019 quarter to 10,563 sales. There are many factors that contributed to the fall in sales earlier in the year. House prices were falling across the country but particularly in Sydney and Melbourne, the credit squeeze made it harder to access finance and uncertainty surrounding the Federal Election and housing taxation policy threw another spanner in the works.

House prices have returned to growth, with both Sydney and Melbourne finishing the year with higher prices than at the start. Cuts to the RBA’s cash rate and the easing of lending restrictions by APRA have made servicing a loan easier. Tax cuts and other stimulus measures have also helped confidence return to the broader housing market and contributed to the increase in land sales.

The increase in the transaction volume can be observed in both the capital city markets and the regional markets. The number of land sales in the regional markets increased by 12.5 per cent in the September quarter, while the capital cities saw a 27.7 per cent increase in the same period.

In this edition of the HIA-CoreLogic Residential Land Report a total of 46 regions were assessed. These regions are located in the six states and include the respective capital cities. Of the land transactions that occurred in the September 2019 quarter, 62.4 per cent occurred in the capital cities.

The increased demand for residential land has not yet had a material impact on land prices. The capital cities saw a 0.7 per cent quarterly increase in the median value of land and the regions increased by 0.6 per cent.

Sydney remains the most expensive city for land in Australia with a median price of $445,000. Richmond-Tweed has overtaken Melbourne for the title of Australia’s second most expensive city/region for land with a median price of $415,000.

The median price of land in Hobart reached an all-time high of $184,750 during the September 2019 quarter. Despite the record price, Hobart continues to be the most affordable capital city for land and the most value for money with the largest median block sizes.

During the September quarter the median lot size in Hobart was 685 sqm. The second largest block size was Melbourne with a distant 484 sqm.

While Hobart is the most affordable market out of the capital cities, South Australia takes out the top three most affordable regions for land sales. The Northern region in South Australia was the least expensive regional market during the September 2019 quarter.

The rebound in land sales coincides with a sharp pick-up in first home buyer (FHB) demand:

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As shown above, the value of new FHB mortgages surged by 38% in the year to December with their share of total mortgages also rising by 3.5% to 20.2%.

Since FHBs are more likely to purchase house-and-land packages, they are likely driving the lift in land sales.

The trend should continue given the Morrison Government’s FHB loan subsidy scheme, which is likely to be expanded given its strong popularity.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.