Exorbitant lot prices are a significant factor against new home sales and construction.
Consider the following charts taken primarily from the 2025 Urban Development Institute of Australia (UDIA) State of the Land Report.
The first chart shows that the median lot price has risen strongly since the beginning of the pandemic across all major housing markets:
The following chart from CoreLogic also shows the extent to which median lot prices have soared over the past decade:
At the same time as median lot prices have surged, UDIA shows that median lot sizes have shrunk:
As a result, the median price per square metre has risen more than the rise in median lot price:
Buyers of lots are paying far more but receiving less in return.
The surge in lot prices has dampened demand, with sales stagnating despite the dire need for more housing:
The post-pandemic surge in residential construction costs has compounded the hyperinflation of residential lot prices.
As illustrated below by Alex Joiner from IFM Investors, residential construction costs in the ABS Producer Price Index have risen by 43% since the beginning of the pandemic:
The only positive news is that residential construction costs fell slightly in Q1 2025.
The following chart from Joiner shows the cost increases since Q2 2019 across the various construction inputs:
The fundamental issue is that the hyperinflation of land and construction costs has made building housing in Australia prohibitively expensive.
In economic terms, the supply curve for housing has shifted to the left, making it more expensive to build homes at every price point.
The Albanese government’s 1.2 million housing target cannot be met under such conditions.
Land prices and construction costs must fall to make new housing developments viable.
We must also curtail population growth through immigration to align housing demand with supply.
