Constrained land supply sees knockdown-rebuild market grow

The most recent HIA-CoreLogic Residential Land Report, which provides updated information on sales activity in 51 housing markets across Australia, has revealed an unusually sharp rise in the price of residential land.

HIA senior economist Nick Ward said this data indicated the supply of land is not keeping up with new demand that has emerged during the pandemic.

“Over the year to the March quarter 2022, median lot prices increased by 19.7 per cent.

“This is not a normal increase – it is the strongest annual growth rate since 2004.

“Constrained supply of land will limit housing activity in greenfield areas from mid-2023 onwards.”

New data released by the ABS on demolitions suggests that knock-down rebuilds and small redevelopments are around 25 per cent of the market for house and townhouse builders.

Mr Ward said it was encouraging that this segment of the market appeared to be growing rapidly, creating new opportunities for the industry.

According to CoreLogic economist Kaytlin Ezzy, the scarcity of available residential land continues to be a driving factor across Australian land markets, with land prices surging at a time when the number of lots sold is declining.

“While increasing interest rates, rising construction costs and increased uncertainty, particularly across the building industry, has likely smothered some land demand, the surge in land prices suggests that those that want to build are finding it difficult to secure lots,” Ms Ezzy said.

“With land often taking more than a decade to move though the development pipeline, it’s unlikely we’ll see any material change in land supply for some time.”