Earlier this week the Housing Industry Association (HIA) in conjunction with RP Data released the Quarterly Land Report for September 2010. The Report highlighted that land sales volumes were at their lowest levels in a decade and -57% lower than the same quarter last year.
Despite the sharp drop in sales activity, the median value of the land increased by 2.8% during the quarter to $186,629. When looking across the combined capital cities, land values increased by 4.5% during the quarter, compared to a fall of -0.4% in regional areas of the country. Despite the fact that land tends to be more expensive within capital cities, three of the five most expensive markets for vacant land across the country are actually outside of capital cities as detailed in the table below.
Most expensive land markets, as at September 2010
Source: RP Data, HIA
Within capital city markets, median land values range from between $145,000 in Hobart up to $269,000 within Sydney. Meanwhile, despite having the most affordable vacant land market, Hobart also has the largest median lot size at 697sqm whilst Adelaide’s average lot size is the smallest at just 377sqm. Across the capital cities, the median rate per square metre of land ranges from $208/sqm in Hobart up to almost $516/sqm in Perth. The table below details the relevant data.
Capital city markets key land data as at September 2010
Source: RP Data, HIA
The data certainly highlights the growing affordability issues and whilst growth in values of homes has eased in recent times, strong growth in land values persist, indicating that Governments at all levels are doing little to assist in making housing more affordable.
Recent data released by the Australian Bureau of Statistics showed that the average adult working full-time earned $1,310/week or $68,120 annually. Based on this data, the average adult working full time would have to spend between two and four times their average annual wage just to secure the land in which to build a new home. Obviously many home buyers do have dual incomes which brings down the cost somewhat however, the result highlights the ongoing affordability issues. When you consider that once the land is secured, owners still need to build the home, pay the consultants and pay the Government fees and charges it’s easy to see why many renters feel that they may never be able to purchase their own home.
These higher prices also impact on the cost of existing housing and have much wider market implications than just the impact on brand new housing.
Tell us your opinion, do you agree with the findings and what can be done to make land more affordable?
“Recent data released by the Australian Bureau of Statistics showed that the average adult working full-time earned $1,310/week or $68,120 annually. Based on this data, the average adult working full time would have to spend between two and four times their average annual wage just to secure the land in which to build a new home. Obviously many home buyers do have dual incomes which brings down the cost somewhat however, the result highlights the ongoing affordability issues.”
Hang on a second, Tim. Hasn’t Chris Joye been saying for years that Australia’s homes are affordable, that prices have merely tracked growth in ‘disposable incomes’, that household disposable incomes are around $100k, and that the house price to income ratio is ‘only’ around 5 times? In fact, just three days ago in the SMH, CJ said that “prices haven’t outstripped income levels since 2003″.
It seems that you have contradicted your fearless leader.
That said, I am relieved that Rp Data appears to have finally woken up to the fact that Australia’s land/home prices are severely overvalued and that younger Australians are being unfairly locked-out of home ownership. I also agree that Australia’s land prices are ridiculous, especially given that similar blocks in Texas can be purchased for only $30k.
@Leith
Just to clarify, Chris Joye is not ‘our fearless leader’. Chris Joye is the Managing Director of Rismark International who are a strategic partner of RP Data’s, Chris’ comments are his own and in no way represent the opinion of RP Data of which Tim Lawless is the Research Director. The analysis of which you speak which Rismark International undertake looks at the ratio of home values to household incomes (as published in the National Accounts by the ABS), we are looking at the average weekly income and comparing it to the value of land. We have continually suggested that there are issues surrounding the cost of vacant land particularly when it is most abundant in areas far from the city centre and in places which tend to lack the necessary infrastructure to support such prices.
Obviously many people looking to purchase vacant land have two incomes however, for singles and low income earners the cost is extremely restrictive and when you add the cost of construction it becomes very expensive.