HIA-RP Data Residential Land Report March Qtr 29 Land s Back on the Rise The latest HIA-RP Data Residential Land Report highlights a rebound in raw land values following some moderation over 28. Median land values grew by a relatively strong 7.4 per cent over the March 29 quarter to a record 172,49. In the face of constant talk of a weak property market and economic gloom and doom, land values climbed 4.4 per cent over the 12 months to March this year. The volume of residential land sales, the earliest hard indicator of future new home building activity, has remained relatively stable in recent quarters. Median Residential Land s The weighted median residential land price in Australia eclipsed the previous high of the December quarter of 27 to reach a new peak of 172,49 in the March 29 quarter. This result followed four consecutive quarters of declining median values. Land prices rebounded over the March quarter of 29 as a direct consequence of significant drops in interest rates since August 28 (nearly 4 percentage points for the mortgagor) and strong demand for house and land packages driven by the First Home Owner Boost. Other leading indicators, such as housing finance, confirm that the first home buyers stimulus has played an important role in stabilising an otherwise soft property market. Without this fiscal stimulus sales volumes could well have plumbed new depths over the March quarter. Median Residential Land s -Australia 18, 17, 16, 15, 14, 13, 12, Record low interest rates and first home buyer grants are providing some of the best buying conditions in years. This report signals that the main constraint facing those entering the market for the first time or those trading up to a new home may be the lack of readily available land. A lack of constant progress in improving timely land supply and reducing new home fees and charges will of course generate excessive price pressure, as we saw through the last up-cycle. A failure to address these structural constraints would unnecessarily dent new home affordability in coming years and constrain the magnitude of a housing recovery. We hope the lesson has been learned. For Australia s capital cities there was a rise of 7.6 per cent in median land prices in the March 29 quarter, reflecting increases in Sydney (5.3 per cent), Melbourne (9 per cent), Brisbane (4.2 per cent), Perth (2.3 per cent), Adelaide (8.5 per cent), and a slight fall in Hobart of.4 per cent. Capital city prices were up by a hefty 9.1 per cent over the 12 months to March 29. The bulk of the easing in median land prices in recent quarters has come from Regional Australia. However, median land prices in Regional Australia rebounded in the March 29 quarter reflecting gains in New South Wales (6.1 per cent), Victoria (3.8 per cent), Queensland (6.1 per cent), and Western Australia (3.9 per cent). Median land prices dropped back by 3.3 per cent in Regional South Australia and by 5.4 per cent in Regional Tasmania. Over the year to March 29 median land prices across Regional Australia fell by 5.2 per cent. 3, 25, 2, 15, 1, HIA Economics Group 79 Constitution Ave Campbell ACT 2612 (2) 6245 1393 http://economics.hia.asn.au 11, 5, 1, 9, Disclaimer: This publication is produced by HIA Economics Group based on information available at the time of publishing. All opinions, conclusions or recommendations are reasonably held or made as at the time of its compilation, but no warranty is made as to accuracy, reliability or completeness. Neither HIA nor any of its subsidiaries accept liability to any person for loss or damage arising from the use of this report.
Median Lot () Quarter Sydney Melbourne Brisbane Adelaide Perth Hobart Weighted Median Jun Qtr 4 3, 138, 145, 15, 126, 8, 147,588 Sep Qtr 4 3, 138,5 155, 125, 131, 85,5 147,311 Dec Qtr 4 312, 138, 166,562 115,5 137, 78,5 15,534 Mar Qtr 5 31, 14, 162,5 125, 139, 91, 151,564 Jun Qtr 5 31, 141, 166,87 12, 149, 85, 156,94 Sep Qtr 5 295, 14, 17, 126, 152,5 9, 16,857 Dec Qtr 5 29, 139, 169, 12, 164,95 85, 159,75 Mar Qtr 6 295, 148,5 175, 127,75 175, 98, 169,676 Jun Qtr 6 291, 146,9 169,212 121, 21, 87, 177,799 Sep Qtr 6 299, 146, 172, 12, 245, 95, 185,323 Dec Qtr 6 297,5 145, 175, 126, 25, 95, 184,6 Mar Qtr 7 275, 147, 175, 123,5 265, 15, 179,255 Jun Qtr 7 3, 147, 175, 119,5 259, 11, 182,751 Sep Qtr 7 276, 146, 18, 13, 26, 117, 178,132 Dec Qtr 7 262,5 149,5 196,95 133, 265, 11, 18,991 Mar Qtr 8 265, 149, 197, 147, 248, 13, 18,54 Jun Qtr 8 252,25 156,95 2, 133,5 238, 115,5 18,669 Sep Qtr 8 255, 156, 26,5 152, 229, 117,5 185,843 Dec Qtr 8 246, 156, 21,5 152, 22, 135, 183,146 Mar Qtr 9 259, 17, 21, 164,95 225, 134,5 197,45 % Change previous quarter 5.3% 9.% 4.2% 8.5% 2.3% -.4% 7.6% previous year -2.3% 14.1% 6.6% 12.2% -9.3% 3.5% 9.1% Residential Land Sales We noted in our last report the importance of seeing some evidence of a stabilisation in the volume of residential land sales by the end of 28. Land sales do appear to have stabilised but in early 29 the numbers remained historically very weak. The volume of sales is not seasonally adjusted and on an annual basis sales across Australia were still down by a large 29.3 per cent in the March 29 quarter (compared to -43 per cent in the December 28 quarter). Following a sharp decline in the volume of land sales over the June 27 September 28 period it is encouraging to see signs of stabilisation, although obviously evidence of improving sales levels would be preferable. Given that land sales volumes is the earliest hard data indicator of future new home building activity, the relative stability rather than growth in sales signals a slow start to the recovery in housing starts from mid 29. This is perhaps a timely reminder that trade-up owner occupiers and residential investors have yet to join the first home buyer table in force in spurring on a housing recovery. However, the strength of new home sales and new home lending data over the first five months of 29 still offers considerable evidence of a modest recovery in residential construction emerging through the second half of 29. Page 2
For the six capital cities, the volume of land sales moved down by 2.8 per cent in original terms in the March 29 quarter reflecting drops for Sydney, Melbourne, Adelaide, and Hobart. The annual rate of change in sales volumes was -26.7 per cent. This result compares to -44 per cent in the December 28 quarter and a low of -53 per cent in the September quarter last year. Median Residential Land s - Capital Cities 21, 3, 19, 25, 17, 2, 15, 13, 15, 1, 11, 5, 9, For the six regional areas there was a drop in sales volumes in original terms over the March 29 quarter of 4.4 per cent. This reflected declines for all regional areas with the exception of Western Australia. On an annual basis sales volumes for Regional Australia were down by 32.6 per cent, a slightly better outcome than previous quarters, albeit coming off lower sales as we moved through 27/8. Median Residential Land s - Regional Areas 16, 14, 15, 14, 13, 12, 11, 1, 9, 8, 7, 12, 1, 8, 6, 4, 2, Page 3
Median Lot Sizes The pattern for median residential lot size across Australia continues to display little variance from one quarter to the next. For the six capital cities the median lot size in the March 29 quarter was again highest in Hobart (693sqm) and lowest in Adelaide (411sqm). Over the quarter there was an increase in median lot size in Perth, Hobart, Brisbane, and Melbourne while falls were recorded in Sydney and Adelaide. Median Lot Size - Capital Cities, Mar 29 Qtr 75 7 693 65 6 582 6 Square metre 55 532 52 5 45 411 4 35 Sydney Melbourne Brisbane Adelaide Perth Hobart Since 21 there has been a decline in median lot size in capital cities which has been most pronounced in Adelaide followed by Perth, Brisbane, Sydney, Melbourne, and Hobart. Median Lot Sizes RP Data 75 7 Hobart 65 Brisbane Square metre 6 55 Sydney Melbourne 5 Perth 45 4 Adelaide Mar-92 Sep-92 Mar-93 Sep-93 Mar-94 Sep-94 Mar-95 Sep-95 Mar-96 Sep-96 Mar-97 Sep-97 Mar-98 Sep-98 Mar-99 Sep-99 Mar- Sep- Mar-1 Sep-1 Mar-2 Sep-2 Sydney Melbourne Brisbane Adelaide Perth Hobart Median lot sizes in non-metropolitan regions are larger than in capital cities, as is to be expected. The largest median lot size in the March 29 quarter was in Regional Tasmania (744sqm). The Page 4
smallest median lot size was located in Regional Western Australia, which has been a consistent finding. Median Lot Size - Regional Australia, March 29 Qtr 8 75 738 744 718 7 7 7 Square metre 65 6 67 55 NSW Victoria Qld SA WA Tas Page 5
Land per Square Metre An update of the price per square metre for residential lots provides a reminder of the erosion in land affordability which has occurred over this decade, with substantial price increases apparent across the board. The biggest increase in per square metre price between March 22 and March 29, a period for which comparable data is available for all regions, occurred for Regional South Australia followed by Regional Tasmania, Adelaide, and Perth. As we noted in the last report, this seemingly odd order is a reflection of the base for the increase in per square metre price being extremely low in many instances. It is the actual cost, not the rate of change in that cost, that highlights land affordability (or the lack thereof) over this decade. A ranking by median price per square metre for a residential lot through to the March 29 quarter yields the same results as reported for 28. Even early in the decade the cost in Sydney was substantially higher than for any other capital city. In the March 22 quarter the median price was 31 in Sydney with the next highest value being 15 in Perth. This one-two pecking order remained intact at the start of 29 despite a general pull-back in Sydney land prices over 27 and 28. Residential Land (per sqm) - Capital Cities ; HIA 6 per sqm 5 4 3 2 1 31 487 292 137 127 35 41 118 15 433 65 194 Sydney Melbourne Brisbane Adelaide Perth Hobart Mar-2 The third most expensive market was Adelaide, a result heavily influenced by the substantial decline in that city s average lot size, followed by Brisbane, Melbourne, and then Hobart. Page 6
Residential Land (per sqm) - Advantage over Sydney ; HIA -5-1 -86-54 per sqm -15-2 -195-137 -25-3 -35-293 Melbourne Brisbane Adelaide Perth Hobart In the March 22 quarter the median price of land per square metre in Regional Australia was highest in Western Australia, closely followed by New South Wales. At the start of 29 the median price per square metre was highest in the resource rich states of Queensland and Western Australia which had both climbed well ahead of NSW. Residential Land (per sqm) - Regional Australia ; HIA 35 3 292 264 25 per sqm 2 15 1 5 11 195 78 138 112 46 131 115 36 17 NSW Victoria Qld SA WA Tasmania Mar-2 Page 7
Sydney The volume of land sales in Sydney remains extremely low. This finding is consistent with widespread evidence that the Sydney new home building market remains close to the weakest in the country in 29. While a trend decline in median land prices since the peak in the December 24 quarter is still apparent, there was a sharp rise in the March 29 quarter. Median Residential Land s - Sydney 32, 1,2 31, 3, 29, 28, 27, 26, 25, 24, 23, 1, 8 6 4 2 (RHS) (LHS) Median land prices in Sydney rebounded by 5.3 per cent in the March 29 quarter to still be 2.3 per cent lower than 12 months previously. The median land price has dropped back 17 per cent from its peak in December 24. Median Residential Land s - Sydney 45% 4% 35% 3% 25% 2% 15% 1% 5% % -5% -1% -15% -2% Sydney Page 8
Regional New South Wales The volume of land sales in Regional NSW has clearly stabilised. Meanwhile, median land prices grew by a significant 6.1 per cent over the March 29 quarter but were still down by 1 per cent from their peak of 155, in the June 27 quarter. Affordability in Regional NSW is still quite healthy relative to recent years, helped in no small measure by very low variable mortgage rates and the stimulus to first home buyers, the latter of which goes considerably further outside of Sydney. Median Residential Land s - New South Wales 16, 3,5 15, 3, 14, 2,5 13, 12, 2, 1,5 11, 1, 1, 5 9, The median land price was down by 1.4 per cent over the year to March 29 to a value of 14,. Median Residential Land s - NSW 6% 5% 4% 3% 2% 1% % -1% -2% New South Wales Page 9
Melbourne The trend decline in the volume of land sales is slowing but the level in the March 29 quarter was still extremely low. This finding is at odds with other housing indicators, together with anecdotal evidence, pointing to a relatively healthy new home building recovery in 29. We noted in the last report that it would be encouraging to see a stabilisation in median land prices in 29 but that recent reports of a substantial shrinking in the pipeline of available land for market rendered this a questionable hope. Sadly the 9 per cent spike in median land values in the first quarter of this year doesn t exactly refute our point and we reiterate that adequate and timely land supply will be important in maintaining and extending the affordability advantage which Melbourne enjoys over most other capital cities. Median Residential Land s - Melbourne 18, 17, 16, 15, 14, 13, 12, 11, 1, 9, 6, 5,5 5, 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 Median land prices grew by a strong 14 per cent over the year to March 29 to reach a new record value of 17,. Median Residential Land s - Melbourne 35% 3% 25% 2% 15% 1% 5% % -5% Melbourne Page 1
Regional Victoria Residential land sales dropped down in the March 29 quarter, a disappointing result following a good jump in the previous quarter. In annual terms, sales were down by 27.1 per cent. The trend decline in median land prices was arrested in March 29 as prices ticked up over the quarter to 96,5. First home buyer new home affordability in Regional Victoria is still higher in 29 than in the previous few years. Median Residential Land s - Victoria 115, 3, 15, 2,5 95, 2, 85, 75, 1,5 1, 65, 5 55, The annual rate of change in median land prices has fallen sharply since the September 27 quarter and turned negative in the September 28 quarter. The annual rate of change over the 12 months to March 29 of -3.5 per cent is considerably softer than the average growth rate of 1 per cent over 22-27. Median Residential Land s - Victoria 3% 25% 2% 15% 1% 5% % -5% -1% Victoria Page 11
Brisbane The savage drop in land sales volumes since the September 27 quarter looks to have come to a close. An apparent stabilisation of sales volumes over the September 28 March 29 quarters is certainly better than further declines. Land sales at the start of 29 were nevertheless still down by 64 per cent compared to their mid 27 peak. A moderate upward trend in median land prices is apparent since mid 28. Median Residential Land s - Brisbane 22, 2, 18, 16, 14, 12, 1, 8, 4, 3,5 3, 2,5 2, 1,5 1, 5 The annual rate of change in median land prices has not turned negative in Brisbane since the beginning of 21 (although there was zero change at the start of 27), and our expectation that median prices would contract again in 29 did not materialise in the March quarter. Annual growth in the March 29 quarter was 6.6 per cent. Median Residential Land s - Brisbane 6% 5% 4% 3% 2% 1% % Brisbane Page 12
Regional Queensland The substantial decline in land sales volumes in Regional Queensland also looks to have been arrested. As with Brisbane, the level at which sales have bottomed out is very low and volumes were still down by 38 per cent over the year to March 29. The relatively sharp fall in median land prices over the second half of 28 did not continue into 29 they way we expected it would. Median prices rebounded in the March 29 quarter to 175, compared to 165, at the end of last year. Median Residential Land s - Queensland 25, 5, 19, 175, 16, 145, 13, 115, 1, 85, 7, 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 The annual change in median land prices turned negative in the September 28 quarter for the first time in nearly eight years and remained negative in March 29 at -2.8 per cent. Median Residential Land s - Queensland 4% 35% 3% 25% 2% 15% 1% 5% % -5% -1% Queensland Page 13
Adelaide The volume of land sales in Adelaide seems relatively stable, reinforcing the profile of a market that has not suffered falls of a magnitude evident in many other parts of the country. Having fallen in the September quarter, sales volumes recovered in original terms in the December 28 quarter but dropped back again in the March 29 quarter, down 8.8 per cent and 27.9 per cent over the 12 months. Median land prices bounced around a virtually flat line over the middle part of the decade before shooting higher from mid 27 with this trend continuing into 29. The median price was up by a strong 8.5 per cent to 164,95 in the March 29 quarter. Median Residential Land s -Adelaide 175, 165, 155, 145, 135, 125, 115, 15, 95, 85, 75, 1,8 1,6 1,4 1,2 1, 8 6 4 2 There has been a clear upward trend in median land price growth from mid 27 with only a moderate easing in the March 29 quarter (+12.2 per cent compared to +14.3 per cent). It seems a lack of affordable land remains a constraint on the rate of increase in new home building in Adelaide. Median Residential Land s -Adelaide 45% 4% 35% 3% 25% 2% 15% 1% 5% % -5% Adelaide Page 14
Regional South Australia The volume of land sales dropped back (in original terms) in the March 29 quarter, and given that the previous March quarter was close to the cyclical peak, volumes were down by 41 per cent in annual terms. s remained relatively stable, but historically very high, with median land prices dropping by 3.3 per cent in the March 29 quarter to 96,7, up just 2.3 per cent on a year earlier. It remains the case that, as with Adelaide, median land prices are not conferring an additional affordability boost to the house and land package market in Regional South Australia. Median Residential Land s - South Australia 11, 1, 9, 8, 7, 6, 5, 4, 1,2 1, 8 6 4 2 The annual rate of change in median land prices has been consistently positive since the end of 26, although the growth rate eased through the second half of 28 and was steady in early 29. Median Residential Land s - SA 6% 5% 4% 3% 2% 1% % -1% South Australia Page 15
Perth Residential land sales and median prices trended down for some time but could now be turning around. In the case of land sales it certainly looks like volumes have bottomed, but sales were still 58 per cent lower in early 29 compared to their peak in March 26. Median land prices peaked in the December 27 quarter at what we have previously termed a rather ridiculous value of 265,. Median land prices have since dropped by 15 per cent, inclusive of a 2.3 per cent rise over the March 29 quarter, to a still comparatively high 225,. Median Residential Land s - Perth 29, 27, 25, 23, 21, 19, 17, 15, 13, 11, 9, 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 The annual rate of change in median land prices has dropped sharply since a peak of over 6 per cent reached in the September 26 quarter, and turned negative at the start of 28. Over 28 the annual decline in prices averaged 1.9 per cent and in the March 29 quarter the median price was down by 9.3 per cent. Median Residential Land s - Perth 7% 6% 5% 4% 3% 2% 1% % -1% -2% Perth Page 16
Regional Western Australia The volume of residential land sales fell a long way from their March 26 quarter peak but look to have stabilised over recent quarters. At the start of 29 sales volumes were still down by 71 per cent from the peak. Median land prices have fallen quite sharply since their high of 27, in the June 27 quarter and despite a quarterly tick-up were still down by 23 per cent through to the start of 29. The moderate increase of 3.9 per cent in the March 29 quarter was contrary to our expectation for further erosion in median land values. Median Residential Land s - Western Australia 22, 2, 18, 16, 14, 12, 1, 8, 2,5 2, 1,5 1, 5 The annual rate of change in median land prices turned negative in the June 28 quarter and at the start of 29 was down by 23.4 per cent. Median Residential Land s - WA 5% 4% 3% 2% 1% % -1% -2% -3% Western Australia Page 17
Hobart The strong upward trend in median land prices was stunted in March 29 while land sales continued their long journey down. The median land price was stable at 134,5 in the March 29 quarter. In a worrying sign for new home building, the volume of land sales fell by 63.2 per cent compared to the March 28 quarter. Median Residential Land s - Hobart 15, 13, 11, 4 35 3 25 9, 7, 5, 3, 2 15 1 5 Annual growth in median land prices dropped back to 3.5 per cent in the March 29 quarter following very strong growth through much of the previous two years. Median Residential Land s - Hobart 14% 12% 1% 8% 6% 4% 2% % -2% Hobart Page 18
Regional Tasmania Land sales volumes dropped back early in 29. Sales were down by 51.2 per cent compared to the March 28 quarter. After a hefty spike in the September quarter, median land prices dropped back over the subsequent six months, and were down by 5.4 per cent over the year to March 29 to a value of 79,75. Land sales volumes are sending a weak signal regarding new home building activity in 29 but the pull-back in median land values is a boost for affordability. Median Residential Land s - Tasmania 11, 1, 9, 8, 7, 6, 5, 4, 3, 2, 7 6 5 4 3 2 1 As has been the case for Hobart, there has been strong house price growth over recent years but that growth rate went into reverse at the start of 29. Over 25 28 the annual change in median land prices averaged 9.7 per cent but the rate at the start of 29 was -3.9 per cent. Median Residential Land s - Tasmania 14% 13% 12% 11% 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % -1% Tasmania Page 19