The cost of vacant land has risen again in 2014 however, the typical area of those vacant lots which have sold has actually increased over the past year reversing a more than 20 year trend of reducing lot sizes.
According to CoreLogic RP Data, the median price of vacant land across the combined capital cities was recorded at $257,500 at the end of 2014. The median vacant land price had increased by 6.2% over the year, the largest year-on-year increase since October 2011. As the first chart shows, the median selling price of capital city vacant land is now at a record high.
Median selling price of vacant land, combined capital cities
Over the past year, the typical area of vacant land has increased, reversing the trend which has seen an ongoing decline in typical vacant lot sizes over recent years. At the end of 2014, the typical land area was 480 sqm, up from 462 sqm at the end of 2013. Although the area increased slightly higher over the past year it has been trending lower over time, 20 years ago the median area of vacant land was 684 sqm.
Median size (sqm) of vacant land, combined capital cities
The cost of vacant land has increased over the year however, the typical area of the land has also increased resulting in very little change to the median rate/sqm for vacant land. At the end of 2013, vacant land had a median cost of $541/sqm, by the end of 2014 this had increased to $543/sqm. Rates per square metre for vacant land have surged over the past 20 years, 20 years ago vacant land cost $84/sqm.
Median rate/sqm of vacant land, combined capital cities
For those looking to buy relatively cheap capital city vacant land, there are fewer options. Over the 12 months to December 2014, only 11,057 capital city vacant land lots sold for less than $200,000 representing 29.3% of all land sales. This proportion has fallen from 32.0% at the end of 2013 and 95.7% of sales 20 years ago.
Over the past 20 years, there has been an ongoing trend in capital city vacant land markets of rising prices, and diminishing areas (despite the slight uptick over the past year). As a result, the rate per square metre of land has increased significantly. 20 years ago the typical lot area was 684 sqm costing $58,750 at a rate of $84/sqm. With the cost of land rising over time, the same sized lot today would cost $371,284 based on the current rate per square metre of $543.
Vacant land sales below $200,000 combined capital cities
Looking across the individual capital cities you can see some quite significant disparity between the typical cost of vacant land. In Sydney ($350,000) and Perth ($305,000) the median price of vacant land is more than $300,000. Median prices in Melbourne ($240,000) and Brisbane ($224,000) are below $250,000 while in Adelaide ($199,500) and Hobart ($125,000) they sit below $200,000. Perth, and Melbourne have seen the greatest increases in land prices over the past decade while the cost in Sydney has barely moved.
Key capital city vacant land statistics, to December 2014
Median lot sizes are smallest in Adelaide (390sqm) and largest in Hobart (791sqm). The typical lot size has reduced across each capital city over the past decade.
With land prices increasing and areas reducing, the rate/sqm of vacant land has increased substantially over the past decade. At the end of 2014, vacant land cost more than $600/sqm in Sydney and Perth and more than $400/sqm in each other capital city except Hobart. On a per square metre basis, the cost of vacant land has more than doubled over the past decade in Adelaide and Perth and almost doubled in Melbourne.
Looking across the individual cities, less than 40% of vacant land sales in 2014 were below $200,000 in Sydney, Melbourne, Brisbane and Perth. When you consider the additional cost to build the house you can understand why there is a dearth of affordable housing in these cities. When vacant land typically costs in excess of $200,000, and keep in mind most vacant land is on the outskirts of the city, a conservative estimate would be that at the very least the cost of building would be another $150,000 to $200,000. The cost of purchasing the vacant land and building a modest new home on the edge of the capital city will cost around $400,000.
Reducing the costs associated with producing vacant land and making more land available would be the best way to improve housing affordability in our capital cities. Although this makes housing in these areas more affordable, the next challenge is improving roads, public transport, local amenities, schools and health care to these areas to truly make them a desirable and practical location in which to live.
In compiling this publication, CoreLogic has relied upon information supplied by a number of external sources and CoreLogic does not warrant its accuracy or completeness. To the full extent allowed by law CoreLogic excludes all liability for any loss or damage suffered by any person or body corporate arising from or in connection with the supply or use of any part of the information in this publication. CoreLogic recommends that individuals undertake their own research and seek independent financial advice before making any decisions. © 2014 CoreLogic.