New land prices in Perth are the highest since the 2007 economic boom, threatening Perth’s mantle as one of the most affordable capital cities in Australia.
According to the latest data from the Urban Development Institute of Australia (UDIA WA), the average price of a new block of land in the Perth Metro Area is now $305,177 and prices are on an upward trajectory.
It is the first time that average prices have reached above $300,000 since 2007 and it is the highest average price recorded by the UDIA WA’s Urban Development Index (UDI) since the December quarter 2007, when the average price hit $317,000 at the peak of that boom.
“Given the high sales volumes and lack of housing supply in the forward pipeline, we are starting to see the knock-on impact on the new land market, where prices have managed to stay relatively stable up until recently,” UDIA WA CEO Tanya Steinbeck said.
According to the UDI, the number of sales during the June Quarter increased 54% on the same quarter last year, and the number of lots on the market is down 71%.
“While the established market has experienced significant price escalation since 2020, the new house and land market has managed to retain a level of price stability,” Ms Steinbeck said.
“That is all starting to change with a 9.5% lift in the average price of land this quarter, and that is a 25% lift year on year,” Ms Steinbeck said.
Like in 2007, when the economic boom was in full swing, the price hikes are attributable to a supply shortage of new land for housing across the Perth Metro Area, and the regions.
While UDIA WA’s figures show that construction activity has lifted this quarter, the increased activity is not sustainable, according to Ms Steinbeck.
“We know that developers are struggling to keep up with demand, and they just don’t have the depth in their forward pipeline to keep construction up to the current levels, or indeed to increase construction levels further, which is what the market really needs,” Ms Steinbeck said.
Urbis Director David Cresp reiterates that the forward pipeline indicates more pain to come for Perth’s new land market, as well as in the apartment sector, where there has been very little activity in recent years.
“Whilst 2024 will see the highest year of apartment completions that we have seen for some time, with 2,566 apartments forecast to be completed, the forward supply pipeline is at much lower levels,” Mr Cresp advised.
“In the first 6 months of 2024, only 661 apartments commenced construction in developments of 25 or more apartments,” Mr Cresp said. “This compares to an average year between 2014 and 2022 where almost 2,000 apartments were commencing construction each year.”
“The costs of construction are now meaning that apartment development is challenging and only financially viable in the more premium areas of Perth,” Mr Cresp said.
Immediate solutions needed to get more homes on the ground, faster.
UDIA WA has consistently highlighted the risks to housing supply from the cumulative impact of poor infrastructure planning and coordination, slow environmental approvals and increasing fees & charges on the timely provision of new homes.
“The State and Federal governments have been listening, and we’ve welcomed the ongoing planning reform measures that have been implemented to date,” Ms Steinbeck said.
“But clearly, more immediate measures need to be taken to alleviate the current crisis,” Ms Steinbeck said.
“We must be realistic about what the private industry can deliver, in the current context,” Ms Steinbeck said. “Private industry needs support to deliver the homes we need, faster.”
UDIA WA will officially launch a State Election Campaign next Friday, outlining a clear set of priorities for the next State Government to work collaboratively with industry on, to deliver desperately needed housing supply.
“Our campaign will focus on three key pillars – making it easier to create the homes we need; keeping the cost of new homes down; and ensuring we plan for our housing needs now, and for the future,” Ms Steinbeck said.
Property tax reform, cutting red tape and investing in infrastructure all form part of the campaign.
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