A Housing Industry Association report reveals land prices in Australia have increased dramatically since 2000, significantly contributing to the rising cost of housing. The report highlights government policies and infrastructure costs as key factors influencing land values, urging a shift towards higher-density housing solutions.
A report from the Housing Industry Association has found land prices have grown by more than 500 per cent since 2000.Australians might need to shift their thinking on how they live in order to address the housing crisis, experts say.
The comments follow the release of a Housing Industry Association-Cotality report that found land prices have risen by about three times more than construction and labour costs since 2000. The report said land was the largest contributor to increased housing costs and found that government policies were impacting prices. “Land prices do not reflect the cost of dirt. They reflect the cost of making land ready for housing,” the report reads. “Before a new lot can be sold, land must be rezoned, serviced, and connected to infrastructure. This includes roads, water, sewerage, drainage, electricity, open space, and community facilities.” Those costs were not funded through government revenue streams, but charged to new housing in a mix of taxes, fees and levies. “The long-run escalation in housing costs has been driven overwhelmingly by land,” Housing Industry Australia chief economist and the report’s lead author Tim Reardon said. “The way governments release, service and tax land has embedded the cost of infrastructure, delays and planning decisions into land prices. “Those costs are paid up-front, capitalised into land values and ultimately borne by new home buyers.” The report also found an increase in greenfield land prices between 2000 and 2025, which saw the average lot price rise more than sixfold. But some experts say land prices have always been the largest cost in delivering new housing and that Australia needs start looking towards solutions such as higher-density housing. Professor Libby Porter, director of RMIT University’s Urban Research Centre, said the report contained assumptions, including that land was “just this thing that you can plot on a diagram”.”We don’t create more of it. It’s highly constrained by things like topography, flood risk and bushfire risk.”Australia’s biggest hardware retailer has started selling tiny homes. Are backyard pods the answer to a national housing crisis? Mr Reardon said the jump in construction costs, which saw it rise as fast as the price of land, was an anomaly.” required significant intervention, closing the economy from imports and exports,” Mr Reardon said. “Now we’re heading back into a much more normal cycle and the price cost of construction is again rising at about the same as inflation.The three main drivers of housing costs were land, construction materials and labour, according to Michael Fotheringham from the Australian Housing and Urban Research Institute.”One of the things we’re seeing is continued interest in new ways of building houses,” Dr Fotherington said.But Dr Fotherington said workforce shortages remained a challenge.”So we can train people up and work for a period of time, but people aren’t staying in those industries for their entire career.”The report highlighted the growth of infrastructure costs, saying it was being felt by new home buyers and slowing housing development.The public policy think tank, CEDA, believes Australia could increase its current housing stock by nine per cent if just one in four standalone homes in the five biggest cities are developed into dual occupancies. In last year’s budget the federal government committed about $1 billion to fund states and territories to build road, energy, sewage and water infrastructure. Mr Reardon said it was an example of the Commonwealth working with the states to address housing supply issues. “It is going to take a number of years to have an impact, but we are starting to see some of those first signs come through,” he said. The report also said land scarcity was an artificial problem born out of planning systems and regulation. She was concerned about any push to remove regulations, saying the trade-offs could be more housing built in areas with higher risks of flooding and bushfires.”There’s a reason for good land regulation — it’s to take care of this finite resource that we all share.” Dr Fotheringham said there needed to be a mindset shift in how Australians live in order to find solutions.”Continuing to grow the urban boundaries brings additional costs in terms of infrastructure and the developer costs, but also the time it takes people to move to and from those locations that are increasingly distant.”Housing Policy
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