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A recent report by HIA-Cotality has revealed a staggering increase in residential land prices, which have surged by over 500% since the year 2000. In contrast, the costs associated with construction and skilled labor have climbed by 150% during the same timeframe.
Tim Reardon, Chief Economist at the Housing Industry Association (HIA), noted, “In the past 25 years, the price of a typical new residential lot has increased more than three times faster than construction costs.”
Reardon emphasized that the primary driver behind the long-term rise in housing expenses is the cost of land itself.
He elaborated that the government’s approach to managing land—through its release, servicing, and taxation—has incorporated infrastructure costs, as well as delays and planning decisions, directly into land prices.
“These costs are paid upfront, built into land values, and ultimately passed on to new home buyers,” Reardon explained.
“The latest HIA-Cotality Residential Land Report, released today, also shows the median price of residential land rose again in the September quarter, reaching a new record high nationally, up more than 10 per cent over the year and growing at around three times the pace of consumer price inflation.”
Reardon said the country had lost sight of this “most pressing constraint” on new home construction, given the huge pressure on all sectors since the COVID-19 pandemic.
“The shortage of shovel-ready land is central to solving the affordability challenge,” he said.
“In just the last year, residential lot prices in Brisbane and Perth increased by 18 per cent and 21 per cent respectively, while Adelaide prices jumped a whopping 40 per cent.”
Reardon warned that unless the problem was resolved, demand would continue to grow for established housing, pushing prices even further up.
Cotality research director Tim Lawless also said construction costs had grown persistently.
“The cost to build a house rose another 1 per cent in the December quarter, pushing building costs more than 30 per cent higher over the past five years,” he said.
Lawless said these high costs also contributed to inflation – which, in turn, has triggered the high interest rates bleeding mortgage-holders dry.
“The cost of new dwellings purchased by owner-occupiers, which has the largest weight in the CPI calculation, was up three per cent in the December CPI, adding to renewed cost of living pressures,” Lawless said.
“With land costs and building costs continuing to trend higher, along with high contribution charges and taxes, project feasibility remain a core challenge for builders and developers in delivering desperately needed housing supply.”
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