Land prices continue to rise, pushing up the overall cost of housing.
Over the past year capital city land prices have increased by 6.0% and regional land prices have increased by 0.6%.
Over the 2013/14 financial year, the median selling price of land has increased by 6.0% across the combined capital cities and by 0.6% across regional markets.
The median land price was recorded at $247,000 across the combined capitals and $156,000 across the regional markets.
The first chart details the ongoing rise in the cost of vacant residential land between the 1989/90 and the 2013/14 financial years.
Over the period, growth in capital city and regional vacant land prices has been quite similar, with capital city prices rising by 394% and regional prices by a slightly higher 420%.
More recently you can see that after the financial crisis there has been very little change in regional land prices while capital city prices have continued to rise.
Switching focus to median land sizes, the cost of land in regional markets is much lower than capital cities and the typical lot size is much larger.
As at June 2014, the median vacant land size within the capital cities was 475sqm compared to 801sqm across the combined regional markets.
If we look back to June 1990, the median lot size was for capital city vacant land was 744sqm compared to 1,012sqm for the combined regional markets.
Not only is the cost of vacant land much lower in regional areas than in capital cities, you get more land for your money.
In June 1990, the median lot size in regional markets was 36% larger than across the capital cities. By June 2014, regional lot sizes were 69% larger than those in capital cities.
With land prices increasing and lot sizes falling there has been a significant rise in the rate per square metre cost of land. In June 1990, capital city vacant land typically cost $65/sqm and regional vacant land typically cost $21/sqm.
As at June 2014, the typical cost of vacant land cost was $530/sqm across the combined capital cities and $180/sqm across the regional markets.
This result indicates that over the period from 1990 to 2014, the cost of land on a square metre basis has increased by 710% in capital cities and 742% across regional markets.
With the supply of vacant residential land available for purchase limited and the size of land reducing there has been a substantial rise in the cost of land.
Of course the rising cost of land is a key contributor to the rising cost of housing. This is particularly noticeable in capital city markets.
The median house price as at June 1990 was $125,000 across the combined capital cities and $79,000 across regional areas.
As at June 2014, the median capital city house price was $550,000 and the regional median was $355,000. Based on this data, vacant land prices accounted for 40% of capital city and 38% of regional house prices in June 1990 and 45% and 44% respectively in June 2014.
It is important to remember the median house price figure is for all homes sold not just new homes which are typically built shortly after the purchase of vacant land.
Nevertheless, the relatively stable ratio of land prices to house prices over time suggests that the relative cost of materials and labour has changed very little and the rising cost of vacant land has pushed up housing costs.
With lot sizes trending lower and land prices rising we can expect to continue to get less land and subsequently less home for a higher price.
Of course we are also seeing a record high level of dwelling approvals for units. While units offer a more affordable price point and locations that buyers would otherwise not be able to live in, they offer even less in terms of space than a house.
The high cost of vacant land continues to inflate the overall cost of housing. Of course the cost of land is much lower and the typical size much greater in regional markets.
Regional economies tend to have a higher unemployment rate, lower wages and fewer employment opportunities than capital cities.
While it might be appealing to move to a regional area for more affordable housing the reality is that it isn’t practical for many people.