Land supply continues to tighten

The country's land market is continuing to see tighter conditions, according to the latest Residential Land Report from the Housing Industry Association (HIA) and RP Data.

According to an April 30 release from the organisations, the final quarter of 2013 saw the total number of residential land sales fall by 1.8 per cent. This represented the second consecutive quarter of decreasing land market activity.

Meanwhile, the median price of land increased 4.2 per cent over the same time period, reaching its highest level on record.

"This is a sign that the supply of residential building land is starting to fall behind the demand for new homes. The upturn in residential building which has much to contribute to overall economic growth risks being brought to a halt by inadequate land provision," said HIA Senior Economist Shane Garrett.

"Policy makers have to act quickly to ensure that the supply of land is boosted. Doing so will greatly improve the chances of sustaining the recovery in residential construction."

RP Data's Research Director Tim Lawless echoed these comments, saying the combination of low interest rates and government grants has led to demand outpacing supply.

With land reaching a premium, it will likely make it more difficult for average home buyers to enter the market. However, investors who have the required capital could reap the rewards of such high demand.

Demand for housing not only means more potential for capital growth, it could also translate to a higher number of Australians seeking rental accommodation.

However, consumers looking to invest in real estate would be wise to explore home loans for investors in Australia sooner rather than later. Tight supply and high demand will only lead to land prices growing, making it wiser to enter the market before that happens.

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