Rising Land Costs Fuel Australia's Housing Dilemma
Rising Land Costs Fuel Australia's Housing Dilemma
1
Australia's housing market is grappling with stark increases in land costs, which are driving home prices to unprecedented heights.
Recent data from the Australian Bureau of Statistics indicates that residential land values surged by 8.8% between 2023 and 2024, reaching a staggering $7.7 trillion.
Over the past 35 years, these values have ballooned from 1.1 to 2.9 times the nation's GDP.
Contrastingly, the value of structures has seen a modest ascent, climbing from 0.88 to just 1.04 times GDP within the same period. Analyst Cameron Kusher from Oz Property Insights points out that since the late 1990s, housing values have consistently outpaced GDP growth. Residential land now comprises 70.5% of Australia's overall housing value, with buildings forming the remaining 29.5%.
Kusher stresses the need to curb land value inflation to temper housing price spikes. He suggests that policymakers focus on reducing land costs and increasing availability to alleviate housing expenses sustainably. The escalation in land prices presents significant challenges for new housing developments, particularly as median lot prices have risen sharply across capital cities within the past decade, per CoreLogic (Cotality) data.
The HIA-Cotality Residential Land Report for Q1 2025 paints a grim picture, with Australia's median residential land price achieving a new peak of $372,620. This marks a 39.2% hike compared to 2019. Additionally, only 8,250 residential lots were purchased in the first quarter of 2025, the weakest sales quarter in 25 years.
This surge in land costs represents a substantial hurdle for housing construction, crucial to accommodating Australia's growing population. Buyers find themselves paying more for less, as median lot sizes decrease but prices per square metre climb. The imbalance between available land and rising demand could exacerbate the already severe affordability crisis.
Without an influx of "shovel-ready" land projects, rising housing demand—stoked by a robust population increase, tight job markets, and improving household incomes—is likely to direct focus to the established housing market. This shift not only amplifies property prices but also restricts new home construction, exacerbating supply issues.
The next steps include addressing the supply-demand imbalance by ensuring a healthy pipeline of development-ready lands complemented by proper infrastructure. At the government level, there's a need for strategic intervention, including a potential reevaluation of immigration policies to regulate demand.
Expectations are high that recent interest rate cuts could revitalise the market, drawing buyers back. However, as senior economist Tom Devitt highlights, without a sufficient land supply across Australian capitals and regions, potential new homebuyers will be pushed towards existing properties, further inflating prices.
Moving forward, decisive government action will be crucial to mitigate the impacts of surging land costs. Mobilising both policy and infrastructure development to stimulate land availability holds the potential to counter this housing affordability crisis.
Published:Friday, 8th Aug 2025 Source: Paige Estritori
In a recent financial disclosure, Bell Financial Group (BFG) announced a notable 44% drop in half-year net profit after tax as it navigates challenging market conditions. While the company's overall revenue declined by 12.5% to $121.5 million, its Technology & Platforms and Products & Services units showed resilience with a combined revenue increase of 12% to $46.3 million. This contrasts sharply with the 23.5% revenue dip in its broking division, which totalled $69.4 million. - read more
The evolving landscape of private credit funds in Australia necessitates greater responsibility from self-directed investors, according to Darren Connolly, the Chief Executive of Investment Markets. As the landscape of fixed income investments becomes increasingly complex, investors are being urged to take ownership of their decision-making processes. - read more
The Reserve Bank of Australia (RBA) recently made a pivotal decision to cut the official cash rate (OCR) by 0.25%, bringing it down to 3.60%. This move marks a total reduction of 0.75% from its peak of 4.35%. Economists and financial markets anticipate further cuts, potentially two more by mid-2026, reflecting a cautious easing policy by the RBA. - read more
As financial planners await forthcoming updates to the Delivering Better Financial Outcomes (DBFO) legislation, many are grappling with significant challenges arising from the first tranche, specifically concerning fee consent requirements. These issues, unfortunately, seem to require legislative amendments as they fall outside the scope of regulatory fixes, amplifying the compliance burden on financial advisers, especially regarding breach reporting. - read more
Unsecured loans are a type of lending product that allow borrowers to obtain funds without the need to offer collateral. This means that the loan is not tied to any physical asset, such as a house or car, which can be seized by the lender if the borrower defaults. - read more
Your credit score plays a crucial role in your financial journey, especially when it comes to obtaining loans in Australia. It's essentially a numerical representation of your creditworthiness and helps lenders assess the risk of lending you money. - read more
Loan refinancing is the process of replacing an existing loan with a new loan, usually with better terms. This financial strategy can be applied to a range of loans including mortgages, car loans, and personal loans. By refinancing, borrowers aim to achieve a more favourable interest rate, adjust the loan term, or consolidate debts. - read more
Navigating the world of personal loans in Australia can be daunting, but understanding the basics of loan eligibility and approval is essential. Personal loans can be a valuable financial tool, helping you manage unforeseen expenses or consolidate debt. However, securing a loan is often dependent on a variety of factors, and being prepared can make all the difference. - read more
Knowledgebase
Subprime Loan: A type of loan offered to individuals with poor credit scores, typically at a higher interest rate.
