Australia's housing crisis: a land-based dilemma
The land beneath our feet is becoming a luxury. Australia's housing market is facing a unique challenge, and it's not just about the buildings; it's the land itself that's causing a stir. Let's dive into this intriguing issue.
The latest statistics from the Australian Bureau of Statistics (ABS) paint a concerning picture. Residential land values have skyrocketed, reaching a record-breaking $8.3 trillion in the 2024-25 financial year. This is a staggering 7.0% increase, and it's not just a one-year blip; it's a long-term trend.
Since 1989, the value of residential land has grown from 1.1 times GDP to a whopping 3.0 times GDP in 2024-25. And it's not just the value; the land's share of Australia's housing stock has increased from 54% in 1990-91 to a substantial 75% today.
As a result, the total value of Australia's housing stock, including both land and buildings, has reached a staggering 4.0 times GDP. This is a critical issue, as it impacts the affordability and accessibility of housing for all Australians.
But here's where it gets controversial... New data from Cotality and the Housing Industry Association (HIA) reveals that lot prices are rising at an alarming rate, with a daily increase of over $200. This is a key driver of Australia's housing affordability crisis. In the 2024-25 financial year alone, median lot values nationally rose by 6.8%.
Over the past decade, lot prices have surged across all capital cities. For example, Greater Sydney saw an increase of $314,350 (84%), while Greater Melbourne experienced a rise of $163,700 (75%). These increases are even more pronounced when looking at the price per square metre, with some cities seeing over 100% growth.
HIA chief economist Tim Reardon commented, "Strong population dynamics have indeed driven an increase in home building activity, but it has also led to some of the fastest lot price increases in the nation."
And this is the part most people miss... The soaring cost of land is a significant barrier to building homes for Australia's rapidly growing population. Economically, this hyperinflation of land costs has shifted the aggregate supply curve, reducing the capacity to build dwellings at all price points.
The federal government's response has been criticized. Instead of addressing the demand by lowering immigration, they chose to increase it to record highs, largely driven by international students. Abul Rizvi predicts that net overseas migration will average an astonishing 300,000 under current policies.
This decision will likely worsen Australia's structural housing shortage. So, what's the solution? Should the government reconsider its immigration policies? Or is there another way to tackle this land-based housing crisis? We'd love to hear your thoughts in the comments; let's spark a discussion!
