Rising Land Costs Fuel Australia's Housing Dilemma

0

Contrastingly, the value of structures has seen a modest ascent, climbing from 0.88 to just 1.04 times GDP within the same period. Analyst Cameron Kusher from Oz Property Insights points out that since the late 1990s, housing values have consistently outpaced GDP growth. Residential land now comprises 70.5% of Australia's overall housing value, with buildings forming the remaining 29.5%.

Kusher stresses the need to curb land value inflation to temper housing price spikes. He suggests that policymakers focus on reducing land costs and increasing availability to alleviate housing expenses sustainably. The escalation in land prices presents significant challenges for new housing developments, particularly as median lot prices have risen sharply across capital cities within the past decade, per CoreLogic (Cotality) data.

The HIA-Cotality Residential Land Report for Q1 2025 paints a grim picture, with Australia's median residential land price achieving a new peak of $372,620. This marks a 39.2% hike compared to 2019. Additionally, only 8,250 residential lots were purchased in the first quarter of 2025, the weakest sales quarter in 25 years.

This surge in land costs represents a substantial hurdle for housing construction, crucial to accommodating Australia's growing population. Buyers find themselves paying more for less, as median lot sizes decrease but prices per square metre climb. The imbalance between available land and rising demand could exacerbate the already severe affordability crisis.

Without an influx of "shovel-ready" land projects, rising housing demand—stoked by a robust population increase, tight job markets, and improving household incomes—is likely to direct focus to the established housing market. This shift not only amplifies property prices but also restricts new home construction, exacerbating supply issues.

The next steps include addressing the supply-demand imbalance by ensuring a healthy pipeline of development-ready lands complemented by proper infrastructure. At the government level, there's a need for strategic intervention, including a potential reevaluation of immigration policies to regulate demand.

Expectations are high that recent interest rate cuts could revitalise the market, drawing buyers back. However, as senior economist Tom Devitt highlights, without a sufficient land supply across Australian capitals and regions, potential new homebuyers will be pushed towards existing properties, further inflating prices.

Moving forward, decisive government action will be crucial to mitigate the impacts of surging land costs. Mobilising both policy and infrastructure development to stimulate land availability holds the potential to counter this housing affordability crisis.

Published:Friday, 8th Aug 2025
Source: Paige Estritori

Share this news item:

Finance News

Clear

Rising Land Costs Fuel Australia's Housing Dilemma 08 Aug 2025: Paige Estritori Australia's housing market is grappling with stark increases in land costs, which are driving home prices to unprecedented heights. Recent data from the Australian Bureau of Statistics indicates that residential land values surged by 8.8% between 2023 and 2024, reaching a staggering $7.7 trillion. Over the past 35 years, these values have ballooned from 1.1 to 2.9 times the nation's GDP. - read more

APRA Imposes Stricter Conditions on KeyInvest 07 Aug 2025: Paige Estritori The Australian Prudential Regulation Authority (APRA) has recently increased its oversight of KeyInvest, a financial services firm renowned for its funeral bond product, by imposing additional licence conditions and raising the capital requirement. This decision follows an APRA review identifying deficiencies in KeyInvest’s risk management framework and questioning the board's effectiveness in maintaining strategic oversight. - read more

Surging House Prices Challenge Australian First-Time Buyers 06 Aug 2025: Paige Estritori As property prices continue to soar across Australia, first-time homebuyers are facing an increasingly challenging market. High-end properties exhibit greater volatility, responding sharply to interest rate changes, as illustrated by CBA data comparing the price fluctuations of the most costly and least expensive homes. Recent interest rate cuts by the Reserve Bank of Australia (RBA) have fueled a rise in property prices, yet costlier homes have not seen as much growth as more affordable ones. - read more

Global Markets Show Mixed Reactions Amid US Economic Uncertainty 05 Aug 2025: Paige Estritori Global financial markets displayed varied performances overnight, with Wall Street experiencing a minor rebound that failed to recover from Friday night's losses. The US dollar remained under pressure, gaining some ground only against the Swiss Franc, as the Federal Reserve's potential early rate cut looms larger. Concurrently, US Treasury yields continued their downward trajectory across all maturities, whereas the Australian dollar held steady just below 65 cents. - read more

Sydney Real Estate Shifts as Seller’s Market Looms 04 Aug 2025: Paige Estritori Australia is gearing up for a shift in the real estate landscape, with industry insiders identifying an emerging seller's market. Sydney's real estate agent and auctioneer, Tom Panos, highlighted this trend after observing a string of exceptionally strong auction results. - read more

Complexities in Reverse Mortgages Alarm Older Australians 01 Aug 2025: Paige Estritori Many older Australians are increasingly struggling to understand the reverse mortgage market, according to recent research and inquiry records from the national brokerage, Seniors First. This complexity is evidenced by a threefold rise in inquiries from Australians over 60 during the past two years, largely driven by concerns over living costs, misconceptions about the products, and inadequate access to information. - read more

US Economy Faces Potential Hard Landing as Tariff Volatility Persists 30 Jul 2025: Paige Estritori The US economy is teetering on the edge of a hard landing, with ongoing tariff disruptions continuing to shake the market, as noted in American Century Investments' latest forecast. Despite some optimism, the challenges persist, keeping hopes for a softer economic transition at bay. - read more