Limited Capital city land creates a steady price push

As soon as vacant land comes to market in many of Australia’s capital city areas, it’s quickly snapped up.

City-based vacant land prices increased significantly over the 2014-2015 financial year.

However this was not the case in regional areas where prices actually went backwards.

Median vacant land prices over time:

  • Settled sales data over the 2014-15 financial years shows that vacant land selling prices increased by 6.0% across the combined capital cities.
  • Across the combined regional markets land prices have fallen by -3.4% over the year.

chart 1

As at June 2015, the median selling price of vacant land was recorded at $258,543 across the combined capital cities and $156,500 across the combined regional markets.

Median land prices in regional areas of the country are now -39% lower than those in capital cities, the widest differential since August 1990.

chart 2

Over the 25 years to June 2015, median vacant land prices have increased by 417% (6.8%pa) across the combined capital cities and by 422% (6.8%pa) across the combined regional areas.

Of the vacant land lots sold over the year to June 2015, the median lot size was 452sqm across the combined capital cities and 810sqm across the combined regional markets.

Our research shows that median lot sizes have been reasonably stable across the combined capital cities over the past twelve months.

chart 3

In regional markets, it has actually risen by 8.3% over the past year.

The median lot size for capital city vacant land has seemingly hit a trough having been relatively stable over the past 2 years.

Meanwhile lot sizes have trended higher over the past year in regional areas.

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With higher prices and fairly steady land areas, the rate per square metre of land has continued to rise over the past year across the combined capital cities while it has fallen in regional markets.

At the end of June 2015 the rate per square metre was recorded at $557 across the combined capital cities and $170/sqm across the combined regional markets.

As can be seen in today’s accompanying charts, on chart 3, the differential in the rate per square metre between capital city and regional residential vacant land is significant.

This is a function of the high cost of vacant land in capital cities and the relatively small lot sizes.

To put this in perspective, 25 years ago the rate/sqm for capital city vacant land was $66 and the typical lot size was 750sqm.

Today capital city land costs $557/sqm and is only 450sqm on average

While a 750sqm lot in a capital city cost $50,000 25 years ago, today it would cost $417,800.

When looking at individual capital cities, vacant land prices are much higher than all other capital cities in Sydney.

chart 5

The cost of vacant land has risen sharply over the past year in Sydney, Melbourne and Perth.

landing-page-backgroundTypical lot sizes have actually risen across most cities over the past year but have generally fallen over the past decade.

On a rate per square metre basis, vacant land in Sydney and Perth is much more expensive than all other capital cities.

The rate per square metre has generally risen over the past year.

As we continue to see the costs of capital city land continue to rise, the rebound caused by this effect is that ultimately the cost of new housing will also rise.

While restricted land supply and excessive charges associated with new development remain, we anticipate that the cost of vacant land and subsequently new housing will continue to rise.



Want more of this type of information?


Cameron Kusher

About

Cameron Kusher is Corelogic RP Data’s senior research analyst. Cameron has a thorough understanding of the fundamentals such as demographics, trends & economics. Visit www.corelogic.com.au


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