Land prices rise but shortages still threaten home supply
New report shows 'a lack of shovel-ready land and associated infrastructure has been by far the number one constraint on home building'.
RESIDENTIAL land prices have increased three times faster than consumer prices over the last year, according to a new report.
The HIA-Cotality Residential Land Report showed prices up by 1.5 per cent in the final quarter of 2025 to be 9.4 per cent higher over the year, increasing almost three times faster than consumer prices over the same period.
The report provides updated information on sales activity in 52 housing markets across Australia, including the six state capital cities.
“The median price of residential land sold nationally reached a new record high in the December quarter 2025, at $397,840,” Housing Industry Australia chief economist Tom Devitt said.
“Perth, Brisbane and Adelaide have been producing new record high prices for a number of years on the back of their leading of the national home building recovery. Sydney, Melbourne and Hobart have just recently produced their own record highs.
“There are also signs in a number of these markets that land shortages are limiting the number of lots being sold and threatening to constrain home building recoveries all over again.
“A lack of shovel-ready land and associated infrastructure has been by far the number one constraint on home building over the last few decades, even with more recent material price shocks and acute labour shortages.”
Devitt said there are tens of thousands of homes that could commence construction around the country if the essential transport and utilities infrastructure was in place.
“The problem is that local and state governments face financial constraints that often impede the timely delivery of such infrastructure and subsequent housing,” Devitt said.
“The recent Australian Government Budget makes progress on a number of these fronts, including $2 billion worth of ‘enabling infrastructure’.
“The reacceleration of lot prices in recent quarters highlights the importance of addressing the constraints to the delivery of more shovel-ready land and infrastructure.
“The Australian government’s commitment is a positive medium-term step in the right direction,” Devitt concluded.
Tim Lawless, executive research director for property data firm Cotality, noted higher land prices were coming at a time when established markets were losing steam.
“We have seen Sydney and Melbourne home values gradually falling since December last year, while the smaller capitals are clearly losing steam as higher interest rates and affordability pressures bite,” Lawless said.
“While we may see some affordability improvements as established markets navigate softer conditions, an ongoing scarcity of new housing remains an offsetting factor,” Lawless said.
“It’s hard to see a material improvement in the affordability of Australian housing until we see a broad-based and sustained supply response underway.”
