The nation’s top home building industry lobby group has warned government policies are having one of the biggest impacts on land prices.
Aussie governments are being blamed as a key part of the nation’s housing crisis in an extraordinary new report that questions their policies’ involvement in surging land prices.
The nation’s typical patch of dirt hit a record high of $391,420 in September, six times what it was at the turn of the millennium, and vastly higher in most capitals.
The Housing Industry Association who backed the report has argued the growth has been compounded by a mix of growing taxation and developers being forced to bear the cost of infrastructure creation in ways that were not the case in the early 1990s.
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The industry group’s Residential Land Report released today argues the nation’s housing crisis is a “government policy induced market failure”, with consistently rising land prices caused by too limited a supply of new land being brought on making creating homes more expensive.
“Land scarcity in Australian cities is largely artificial, created by planning systems, infrastructure funding models and regulatory processes that ration supply and load costs onto new housing supply, rather than consolidated (state government) revenue,” it notes.
In the past decade parcels of land have roughly doubled in price in Melbourne, Brisbane, Adelaide and Hobart, and are up about 67 per cent in Sydney.
This is despite the size of a typical block of land having shrunk anywhere from 450sq m to 388sq m in Sydney, to a more modest 419sq m to 391sq m in Melbourne.
The only capital where land sizes increased was Brisbane, up from 450sq m to about 506sq m in the past 10 years.
The upshot has been that the cost for a single square metre of land has soared, with Sydney buyers now paying an extra $1000 for each metre of their block, while Melburnians, Adelaideans and Brisbanites cough up an extra $500 on average.
HIA chief economist Tim Reardon said the cost of land primarily reflected the cost of making it available to build on, including connections for sewerage, plumbing and electricity, but also surrounding infrastructure included in new housing estates.
While developers pay the costs upfront, they are typically passed on to the person who buys the land to build a home on it.
Mr Reardon said governments could reduce the cost of land for homebuyers if they were to change policies requiring developers to pay infrastructure fees upfront, if they took on infrastructure installation themselves.
“The best way for governments to raise more revenue is to build more homes,” he said.
“They raise $200,000 in direct taxation per home. And so paying for the upfront infrastructure will be a revenue positive.
“By increasing the take on land and shifting it to upfront costs they have slowed down the supply of land and increased those prices.”
The economist said while the process of shifting costs to developers had started in the 1990s, it had progressively deteriorated from 2000.
However, while Mr Reardon said there were signs governments were seeing the impacts and understanding their role in price increased, even if the government did reverse the process — it would take a decade to clear through land already impacted by the cost drivers.
Prominent property developer Villawood Properties boss Rory Costelloe said there was no question government actions had inflated land prices.
Mr Costelloe said some of the biggest spikes in the past 25 years had been caused by the Howard government’s home grants in 2001, a land shortage in 2017, plus the Homebuilder scheme from the Morrison government in 2020 and 2021.
The Albanese government has also been accused of inflating housing prices after expanding the nation’s First Home Guarantee scheme to effectively remove caps on the numbers of people able to use it.
“The greed of the industry is a factor as well, they do push prices up,” he said.
“But they couldn’t do that if there was more supply.”
He added that in addition to direct housing industry policy moves, government big builds had caused significant cost spikes by increased competition for trades and materials.
Any policies that caused delays to land being developed were also often leading to increased prices for homebuyers, as the longer a developer held onto land the greater their bills for land tax and other holding costs.
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