A lot of debate is happening in the “Twittersphere” about whether housing supply is relevant to Australia’s dwelling prices.
I’m not sure why people try to argue that’s it isn’t relevant, but anyway, my view is obviously that it is.
Without further ado, moving on to a release from the Housing Industry Association (HIA), and we can see that due to a lack of supply, Australia’s capital city land prices are soaring, with median lot prices in Australia accelerating higher over Q3 2014.
The HIA data showed that median lot values jumped by another 3.3 percent over Q3 2014 to a record high.
Gains all driven by capital cities
It is essential to note, however, that this acceleration in prices is not in any being driven by regional land prices, with median lot values increasing only marginally by 0.7 percent.
Tim Lawless of Core-Logic RP Data noted that the decline in the number transactions does not bode well for dwelling approvals over the medium term, which sounds logical enough.
Accelerating prices are due to slow supply
In the words of the HIA:
“There are clearly pressures building in terms of the available residential land supply. Acute supply bottlenecks are affecting Australia’s residential land market.The number of transactions fell while price growth accelerated.Turnover decreased by 16.7 percent in the quarter while at the same time prices grew by 3.3 percent. These are the classic hallmarks of a market which is fast running into supply problems.The process of delivering new land supply and infrastructure is too slow and too expensive. Policymakers have to intervene to ensure Australia’s long term housing needs are met.”