Home News Land values rise despite muted demand

Land values rise despite muted demand

Font size :

There seems to be an inconsistency with how the residential land market is currently behaving.

There seems to be an inconsistency with how the residential land market is currently behaving, according to the latest Housing Industry Association-CoreLogic Residential Land Sales Report.

The anomaly was observed in the movement of land prices: During the September 2018 quarter, land values rose by 0.8% to $279,949 while sales of vacant land fell by 16.2%. In annual terms, land prices increased by 0.9% as land sales declined by 25.8%.

HIA chief economist Tim Reardon said the fall in demand for land would typically result in a decline in land prices, which is not the case this time around.

"After five years of exceptionally strong sales activity, a credit squeeze and a loss of market confidence led to a rapid fall in new home sales and approvals. This slowdown is evident in land sales. Unfortunately, the fall in demand has not yet resulted in a fall in price," he said.

One explanation for this is that the data included many off-the-plan homes sold earlier in the cycle before the credit squeeze commenced. Reardon said these off-the-plan purchases were decisions made in entirely different market conditions.

"The impact of the fall in demand for new homes and the rise in land prices places additional pressures on the new home market. A rise in land prices, the single largest cost to the construction of a new home, is occurring at the same time as the price of established homes is falling," he said.

As the cost of building a home increases, fewer new dwellings are expected to commence construction as homebuyers shift to established homes or delay their home purchases, Reardon said.

"It is this shortage of supply of new homes that was the key factor that drove rapid house price growth over the past two decades," he said.

Tim Lawless, CoreLogic's research director said the muted land sales are apparent in bigger housing markets such as in Sydney and Melbourne, where housing conditions have been waning since mid-2017. While these markets are witnessing a slowdown in activity, land prices are falling at a slower rate than housing prices.

"The resilience of land prices relative to the wider market likely reflects the scarcity value of well-located vacant land in these cities," Lawless said.

It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan

Mortgage News and Articles

Banning commissions is the best option for brokers and borrowers, says industry figure Banning commissions is the best option for brokers and borrowers, says industry figure

A broker has written an open letter arguing that removing commissions will benefit the whole industry Read more

More Aussies to struggle with mortgage repayments: Moody's More Aussies to struggle with mortgage repayments: Moody's The ratings agency expects an increase in delinquencies over the next few months ... Read more

Will Labor’s negative gearing changes only worsen the housing downturn? Will Labor’s negative gearing changes only worsen the housing downturn? Rate cuts would cushion the impact of the changes, but prices are likely to fall further ... Read more

Borrowers turn to customer-owned banks for home loans Borrowers turn to customer-owned banks for home loans They are ditching the Big Four banks due to the controversies uncovered during the royal commission's queries ... Read more

More mortgage news and articles

Sponsored Links

Saturday, Mar 23, 2019
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Let us help you find the right home loan for your needs.

Tell us a bit about your circumstances:
  • Purpose of mortgage
  • Household Income
    $
  • How much do you want to borrow?
    $
  • How much deposit do you have?
    $
  • How much is your house worth?
    $
  • How much do you still owe on your mortgage?
    $
  • What type of mortgage do you have?


  • How much is your new home?
    $
  • How much do you want to borrow?
    $
  • How soon do you want a mortgage?
Next
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords