More land needed to build the government’s target of one million new homes

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The Australian government wants to build one million new homes over five years from 2024. But while the target isn’t impossible, it would be a tough ask given increasing land prices.

Nick Ward, HIA senior economist, said land prices have risen over the year to the June quarter 2022 by 15.4% – the fastest rate of annual growth since 2004, excluding the prior two quarters.

“Prices appear to have risen close to a consumer’s capacity to purchase land,” Ward said. “The increases in the cash rate will likely further constrain a consumer’s ability to buy, risking a reduction in the number of homes expected to be built. In order to achieve the Australian government’s target of building one million new homes over five years from 2024, the supply of land will need to improve in the near future and the cost decline.”

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Kaytlin Ezzy, CoreLogic economist, said the “government’s goal to complete one million new homes is an ambitious one,” especially given current land supply – this despite approximately 975,000 homes being completed over the five years to June 2022.

“While the interest rate rises seen over the past six months will have put some downwards pressure on land prices, until there is a material change in supply, median land prices will likely remain elevated,” Ezzy said.

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