Australia's housing crisis is a land crisis in disguise!
The latest stats from the Australian Bureau of Statistics (ABS) reveal a shocking truth: residential land values have skyrocketed, reaching a record-breaking $8.3 trillion in the 2024-25 financial year. This is a 7.0% increase, and it's not just a blip - it's a trend that's been building for decades.
Back in 1989, residential land values were a modest 1.1 times GDP. Fast forward to 2024-25, and they've ballooned to a staggering 3.0 times GDP. That's a massive jump, and it's not just limited to land values. The share of Australia's housing stock that's land has also increased, from 54% in 1990-91 to a whopping 75% in 2024-25.
So, what does this mean for the total value of Australia's housing stock? Well, it's now a whopping 4.0 times GDP. That's a huge burden on the economy and a major factor in Australia's housing affordability crisis.
New data from Cotality and the Housing Industry Association (HIA) paints an even more concerning picture. Lot prices across the country are rising by over $200 a day, and this trend has been consistent over the last decade. The median lot values nationally rose by a substantial 6.8% in the 2024-25 financial year alone.
Take a look at the capital cities:
- Greater Sydney: an increase of $314,350 (84%)
- Greater Melbourne: an increase of $163,700 (75%)
- Greater Brisbane: an increase of $189,400 (90%)
- Greater Adelaide: an increase of $105,500 (57%)
- Greater Perth: an increase of $125,000 (50%)
- Greater Hobart: an increase of $190,000 (146%)
And these increases are even more pronounced when you look at the price per square metre.
- Greater Sydney: an increase of $1140 (126%)
- Greater Melbourne: an increase of $578 (112%)
- Greater Brisbane: an increase of $495 (104%)
- Greater Adelaide: an increase of $337 (63%)
- Greater Perth: an increase of $353 (52%)
- Greater Hobart: an increase of $324 (165%)
HIA chief economist Tim Reardon commented, "Strong population dynamics have indeed driven an increase in home building activity." But he also noted, "Unfortunately, this has led to some of the fastest increases in lot prices in the nation."
The soaring cost of land is a major hurdle for building homes to accommodate Australia's rapidly growing population. In economic terms, this hyperinflation of land costs has shifted the aggregate supply curve to the left, reducing the capacity to build dwellings at all price points.
And here's where it gets controversial: the federal government's response. Instead of addressing the issue by reducing demand, particularly through immigration, they've chosen to ramp up immigration to record highs, largely driven by international students.
Abul Rizvi, in a recent forecast, predicted that net overseas migration will average an extraordinary 300,000 under current immigration policies. This decision will likely exacerbate Australia's structural housing shortage, making an already challenging situation even more dire.
So, what's the solution? How can we address this land bubble and ensure affordable housing for all? Share your thoughts and let's spark a conversation!
