More land is required to build one million new homes

The government will need to release more land if they’re to meet their goal of building one million new homes in five years, according to experts.

Housing Industry Association Senior Economist, Nick Ward said rising land prices and a lack of supply are likely to make it difficult to achieve the government’s lofty goals.

“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,” Mr Ward said.

“Land prices increased over the year to the June Quarter 2022 by 15.4 per cent.

“Excluding the prior two quarters, this is the fastest rate of annual growth since 2004.”

The HIA-CoreLogic Residential Land Report found higher prices are now stretching homebuyers’ budgets.

“Prices appear to have risen close to consumer’s capacity to purchase land,” Mr Ward said.

“The increases in the cash rate will likely further constrain consumer’s ability to buy, risking a reduction in the number of homes expected to be built.

CoreLogic Economist Kaytlin Ezzy said high land prices are likely going to remain for some time.

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

“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.”

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.