Australia’s land market in a four-decade boom

Australia appears to be in a 40-year land price boom, with the latest data showing a robust increase in the value of land across states and territories.

Figures from the Australian Bureau of Statistics showed that the estimated value of residential land in Australia has increased from $4.9tn to $6.6tn over the 2021 financial year.

BuyersBuyers co-founder Pete Wargent said the jump in the overall land values represent a growth of more than a third, which is remarkable given the recessionary conditions brought about by the pandemic.

“At face value, there has been a huge increase in the value of residential land, more than doubling over the past eight financial years,” he said.

“But it should also be recognised that more land is being released and used for residential purposes as the population grows over time, so a good part of the increase in land values is baked in.”

Mr Wargent said the demand for residential land is “exceptionally” high in the current market.

“We expect to see a further increase in land values, and consequently, free-standing houses are highly likely to enjoy strong capital growth in the long term, in most of the established areas and landlocked suburbs in the country,” he said.

Population growth drives land demand

BuyersBuyers CEO Doron Peleg said the growth in Australia’s population has been a key factor in rising land values, alongside structurally lower interest rates and an increase in Australian household wealth.

“Take the state of New South Wales, where the estimated resident population has increased by round 3 million over the past four decades, while the average number of persons per household has declined significantly, creating significantly more demand for residential land,” he said.

“Although population growth in the state has slowed dramatically through the pandemic, there was a very rapid run-up from around 2006 onwards through the mining boom years and beyond.”

This recent strength in land values, Mr Peleg believes, has been driven primarily by coastal and lifestyle locations, on the back of buyers using flexible working arrangements and seeking more space over the past two years.

“We expect that the demand for land will remain strong, and land values are highly likely to deliver strong price increases, particularly in the long term,” he said.

Mr Wargent said a key drawcard for long-term investors in land and property is the ‘survivorship’ factor.

“Property will continue to go through cycles, but well-located residential land in cities such as Sydney and the desirable coastal suburbs of New South Wales will still be in extremely high demand 40 years from now, hence its enduring popularity,” he said.

“However, you need to know where to buy, as not every property on a large piece of land will deliver strong price appreciation – a forward-looking view and detailed analysis is required to identify sound opportunities in this highly competitive market.”

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Photo by  @bendavisual on Unsplash.