Record Land Price Inflation as Australians Move to Regions

Australia has chalked up record land price inflation during the past 12 months, triple the highest recorded, as buyers scrambled for HomeBuilder stimulus packages.

Prosper Australia advocacy director Karl Fitzgerald said he was “astonished” that the cost of land had escalated $1.72 trillion.

“The federal government must address the runaway problem of land prices,” Fitzgerald said.

“We’re astonished that the $1.67 trillion increase in residential land prices is $1 trillion beyond our most optimistic forecast.”

National land values have pushed beyond $7.8 trillion, making it Australia’s largest asset class, but Fitzgerald said the debate around land supply constraints and housing affordability were ill-founded.

“The past year has show this is nonsense—we have had negative migration levels and yet a record increase in land prices,” he said.

“The incessant call for more land supply has been snookered by this data … this is a clarion call for a land policy that captures this sky-rocketing value to invest back into our communities.”

Australians now own $9-trillion worth of real estate.

New South Wales and Victoria experienced the lion’s share of price inflation, accounting for almost 70 per cent of the national land price increase.

RPM’s Residential Market Review for the second quarter of 2021 showed stimulus packages had pulled forward new home demand in greater Melbourne and boosted land prices to their highest since March, 2018.

Strong ongoing demand for land in the face of a very hot established property market was fuelling record land rates in the englobo space, according to RPM managing director of transactions Christian Ranieri.

“Developers who were previously reluctant to go too far are now looking well beyond the traditional Melbourne area and creating a price storm as they explore regional and peri-urban areas such as Mount Macedon and Bellarine Peninsula,” Ranieri said.

“The biggest risk is the proposed windfall profits tax, which will penalise developers by up to 50 per cent of any gains achieved through rezoning.

“This could really batter the land sector, making it daunting for developers and investors, and causing a retail price frenzy as stock becomes scarce.”

But the move to regional areas is more than a passing trend.

Canstar released its Australian property market report identifying 110 rising star suburbs across the country expected to perform well in 2022.

It ranked eight capital cities and six regional areas across five key metrics including sales volumes, quarterly price growth, vacancy rates, rental growth and infrastructure spending.

According to the data, the regional markets will be the ones to watch in 2022 ahead of the capital cities.

The Central Coast’s Blue Haven, Toukely and Gwandalan were top ranked, while regional Queensland came second with areas including Bundaberg East, Burleigh Waters and Little Mountain in the mix.

Regional Western Australia was also in the top three with areas including Broome, Carey Park and Halls Head dominating the mining towns.

Report co-author Terry Ryder, who publishes Hotspotting, said the exodus to lifestyle regions was a long-term demographic shift.

“Regional areas are the ones to watch according to this new research, supporting the dominant real estate trend seen in recent years dubbed ‘Exodus to Affordable Lifestyle’, whereby residents of larger cities relocate to smaller cities and regional areas,” he said.