Australia's housing market: a land-based crisis
A bubble that's all about the land
Last week, a report from the Australian Bureau of Statistics (ABS) revealed a startling trend: the value of residential land in Australia has been skyrocketing. In the 2024-25 financial year alone, it increased by a whopping 7.0%, reaching a record-breaking $8.3 trillion. But here's where it gets controversial...
The data shows that the value of residential land has been on an unprecedented rise since 1989, now standing at a staggering 3.0 times the country's GDP. And it's not just the overall value that's concerning; the land share of Australia's housing stock has also increased significantly, from 54% in 1990-91 to a whopping 75% in 2024-25. This means that the total value of Australia's housing, including both land and buildings, has reached a staggering 4.0 times GDP.
A crisis in the making
New research from Cotality and the Housing Industry Association (HIA) paints an even more dire picture. Lot prices across the nation are rising by over $200 per day, exacerbating Australia's housing affordability crisis. In the 2024-25 financial year, median lot values nationally soared by 6.8%. And this trend is not limited to a single year; over the past decade, lot prices have surged across all capital cities.
Take a look at the increases in lot prices over the last ten years:
- Greater Sydney: $314,350 (84%)
- Greater Melbourne: $163,700 (75%)
- Greater Brisbane: $189,400 (90%)
- Greater Adelaide: $105,500 (57%)
- Greater Perth: $125,000 (50%)
- Greater Hobart: $190,000 (146%)
And it's not just the overall prices that are rising; the price per square metre has also increased significantly as lot sizes have shrunk. Here's a breakdown of the decade-long increases in lot prices per square metre:
- Greater Sydney: $1140 (126%)
- Greater Melbourne: $578 (112%)
- Greater Brisbane: $495 (104%)
- Greater Adelaide: $337 (63%)
- Greater Perth: $353 (52%)
- Greater Hobart: $324 (165%)
HIA chief economist Tim Reardon commented, "Strong population dynamics have indeed driven an increase in home building activity." However, he added, "Unfortunately, this has also led to some of the fastest increases in lot prices in the nation."
The soaring cost of land is a major hurdle for housing development, especially with Australia's rapidly growing population. Economically speaking, this hyperinflation of land costs has shifted the aggregate supply curve to the left, reducing the capacity to build dwellings at all price points.
A missed opportunity?
The federal government's response to this crisis has been a topic of debate. Instead of addressing the issue by lowering immigration to reduce demand, they chose to increase immigration to record highs, largely driven by international students. Abul Rizvi, in a recent forecast, predicted that net overseas migration will average an extraordinary 300,000 under the current immigration policies.
This decision is expected to worsen Australia's structural housing shortage, leaving many to question whether a different approach could have mitigated this crisis.
What are your thoughts on this matter? Do you think the government's decision was justified, or is there a better way to tackle this housing bubble? Share your insights in the comments below!
