Land Sales Volumes Down, Prices Rise

Those who have read this blog before will know that the continuing issue of housing affordability in Australia, and my concerns/frustrations in response, are not foreign concepts. 

Last year there were numerous publications considering the situation;  September saw the release of the Real Estate Institute of Australia’s Deposit Power Housing Affordability Report, which recorded the sixth consecutive quarterly decline in housing affordability in Australia.  Prior to that, the Housing Industry Association and the Commonwealth Bank jointly released their Housing Affordability Report in August, which found that housing affordabilities were at record lows around Australia. 

Following the release of both of these reports, I commented on the necessity of government action to develop a strategy to at least make some inroads into the situation. 

And with the recent release of the September 2010 Quarterly Land Report by HIA and RP Data, I find myself writing about the issue again.  The report found that land sales volumes were at their lowest point in a decade, while land values had increased. 

These figures don’t really surprise me – it takes a lot to build a property.  With the costs of the land itself, your legal requirements, council approvals, designing your home, and the supplies and labour needed to construct it, starting from scratch can be a tremendously expensive exercise.  And if land prices rise, this may not be a viable option for many potential home owners. 

So they are then left with the option of buying an established property, thereby adding to the housing shortage we already face, as opposed to lessening the pressure. 

With Australia already looking at a substantial housing shortage (JP Morgan estimated the shortage to be around 180,000 homes in its Economic Research and Global Data Watch 2010 report, while the Federal Government’s Housing Supply Council 2010 Report suggested the shortage was closer to around 200,000 houses), it is imperative that sufficient land is released to address the growing demand for housing. 

Essentially, governments at all levels need to recognise the growing housing affordability crisis facing Australians and formulate solutions to take action.  For example, the rezoning of more areas to increase medium density housing may be a way to help overcome the shortage. 

Unfortunately, when it comes down to it, it will be Australians that suffer from this housing situation, especially first home buyers.  If land is too expensive, sadly it will usually just lead to more expensive homes for consumers. 

Posted by Charles Tarbey on 31/01/2011 at 9:57 AM | Categories: Property Management - Investors -

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