INCREASED ACCEPTANCE OF SMALLER LOTS HAS KEPT LAND PRICES FROM RISING EXCESSIVELY OVER THE PAST YEAR.
With demand for vacant land increasing and stock levels declining, there has been upward pressure on prices over the past 12 months. But rather than the double digit gains that were experienced from 2003 to 2007, the growth in the median vacant land price in Greater Perth has been minimal.
Based on the latest settled land sales data (as more sales reach settlement these figures will change slightly), the median price of blocks sold in the first half of the year was $230,000, which is unchanged from 12 months earlier.
Meanwhile, estimates from the ABS showed that established house prices in Perth increased 8.6 per cent over the last 12 months.
So what’s going on here?
Understanding land price growth is, unfortunately, not straight forward. We’ve taken every settled land sale in Perth over a period and looked at the median price, but the median price is not an ideal measure of land price growth. The median can be affected by the composition of lots selling. Additionally, changes in the size of lots selling in one period compared to another affect price growth estimates.
This is indeed what is happening. Driven by housing affordability, changing buyer preferences, policy prescriptions and a desire to increase development yield, among others, lot sizes in Perth are decreasing and helping to keep price growth from ramping up excessively. Rather than a lift in the overall block price, the price per square metre in Greater Perth increased 4.3 per cent to $557.
Whilst prices increase much faster in some areas compared to others, the trend is fairly consistent. The median price per square metre increased in 43 out of the top 50 highest selling suburbs in WA over the year. As shown below, the top ten suburbs by land sales have all experienced an increase in the median price per square metre.
* Excludes sales of blocks larger than 3,000m2.
** Includes sales of all vacant residential land settled as of October 30, 2013
^ Percentage change based on sales in Jan-Jun 2013 against sales in Jan-Jun 2012