Residential land sales in Australia sinks further in 4Q2010

CANBERRA: Residential land values continued to rise and sales volumes sunk further in the December 2010 quarter, said the Housing Industry Association (HIA).

The HIA-rpdata.com Residential Land Report found the volume of land sales fell sharply in the December 2010 quarter (4Q2010), reaching the lowest level in a decade. Sales were down by 40.4% compared to the same quarter in 2009.

Meanwhile, the weighted median land value in Australia accelerated in 4Q2010, growing by 4.1% to A$194,161 (RM619,466.62). Over the year to December 2010, the median value was up 5.9%.

"The escalation in land values highlights an on-going deterioration in new home affordability driven by constraints on supply," said HIA economist Matthew King in a statement recently. "The sharp drop in the volume of land sales signals a very weak 2011 for new home building.

"Apart from the considerable damage wrought by the interest rate hikes of last November, new housing continues to sag under the weight of the excessive cost of serviceable land.

"Put together planning and zoning delays, high regulatory costs, deficient land release strategies, disproportionately high taxation, user pays infrastructure charges, and an on-going credit squeeze, and you have a recipe for crippling land values.

"Policy solutions can be found by all levels of government, but there is currently little evidence of solutions being sought, which is to the detriment of affordable housing for entry level buyers and rental households alike," King added.

RPdata.com research director Tim Lawless agreed that the low number of land transactions paint a worrying picture for future housing supply.

"Land sales are a reasonable lead indicator for future supply additions to the market and a forty percent reduction in land sales points to ongoing weakness in the housing construction sector which is already very soft.

"Looking at sales volumes across built product, ie houses and units, transaction numbers recorded a fall of twenty percent over the same time period.  That’s a soft result in itself, but those figures look reasonably healthy when compared to the volume of sales within the vacant land market."

"While land sales continue to fall the price of land continues to rise.  This divergence illustrates the imbalance between supply and demand.  A lower number of sales would often suggest demand is drying up, however with land prices continuing to rise the fall away in land transactions is clearly supply related."