Capital City Vacant Land Values Rise Through 2014
By Street News on 15 Mar 2014
No Comments yet, your thoughts are very welcome
Land prices are up significantly, though lot sizes have shrunk
Photo: Kenneth Allen
News this week from RP Data senior research analyst Cameron Kusher shows that the price of vacant land across the capital cities continued to climb throughout 2013.
At the end of the year, the median selling price was $249,000, which is an increase of 6.9 per cent throughout the year with vacant land prices now at historic high levels.
RP Data reported that the annual rate of growth in median selling prices was the largest annual change since they rose by 8.5 per cent over the 12 months to August 2011.
Across each capital city, Mr Kusher said it’s easy to see an occurring disparity between the cost of land and the typical size across the cities.
Selling Prices Have Increased Significantly in Most Capital Cities
Median selling prices of vacant land are highest in Sydney ($305,000) and lowest in Hobart ($150,000). Most cities have recorded a significant increase in selling prices over the past decade, however; it is worth noting that growth in Sydney has been minimal.
Median lot sizes tend to be much larger in Hobart (828sqm) than they are across the other capital cities. Typical vacant land areas are smallest in Adelaide at just 375sqm.
“The average lot size has reduced quite significantly over time…”
All capital cities recorded a rise in median land sizes throughout 2013.
Mr Kusher said, “We’ve seen a large reduction in the median lot size of vacant land over recent years. When preparing today’s analysis, we were surprised to see a slight reversal of this trend throughout 2013.
“At the end of 2013, the average vacant lot size across the combined capital cities was 500sqm, which is slightly higher than the 466sqm at the end of 2012. The average lot size has reduced quite significantly over time; 20 years ago the typical lot size was a much larger 701sqm.”
Vacant land is most expensive in Sydney, according to RP Data
Photo: Alex Proimos
Median Rate Per Square Metre Falls
Although today’s results show that vacant land median selling prices rose over the year, the rise in median land area has resulted in a slight fall in the median rate per square metre.
Currently, the median rate per square metre for vacant land was recorded at $507.70/sqm at the end of 2013 compared to $509.39/sqm at the end of 2012.
Mr Kusher commented that this result highlights that as prices have risen and sizes have shrunk, there has been a sharp rise in the cost of land on a square metre basis.
“Twenty years ago, the median rate per square metre for capital city vacant land was recorded at $76.47/sqm,” he said.
As a result of falling lot sizes and vacant land price increases, we have seen significant rises in the rate per square metre for land across each city over the past decade.
Perth land is the most expensive on this measure ($631.46/sqm) followed by Sydney ($608.27/sqm). The rate per square metre for land in Hobart is significantly lower than all other capital cities at $147.82/sqm.
Lot Sizes Shrink While Prices Rise
Mr Kusher said that the ongoing trend across capital city vacant land markets has been diminishing lot sizes and rising prices.
“If you were to buy a piece of land today 701sqm in size (which was the typical size 20 years ago) it would cost $355,896. Compare this to the current capital city median of $249,000 for 500sqm. A 500sqm lot would’ve cost just $38,235 20 years ago.
“With vacant land costs increasing over the past 20 years, it is no wonder there has also been an ongoing increase in the overall cost of housing,” Mr Kusher said.
“All capital cities recorded a rise in median land sizes throughout 2013.”
“The starting point for land in the capital cities is currently $249,000, and when you add in build costs it is no wondering the size of land has trended so much lower as developers look to provide relatively affordable housing options for price sensitive buyers.”
Overall, this analysis tends to suggest that one of the solutions to housing affordability issues is to reduce the cost of land.
RP Data analysts suggest that the way to do this is to either greatly increase the supply (expand urban boundaries and grant approvals quicker) or reduce the built in costs of developing the land, which includes taxes and government fees and charges.
