Australia’s Land Prices Surge Ahead - Rising Land Costs Now Far Outpacing Inflation Nationwide

HIA Chief Economist Tim Reardon warns that the surge in land costs is a major obstacle to achieving the government’s goal of building 1.2 million new homes over the next five years. He says the trend reflects shifting demand patterns over recent years.

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“Home buyers have flocked to states like Western Australia, South Australia and Queensland where abundant and affordable shovel-ready land has been available,” Mr Reardon explains. “This increase in activity means that, unfortunately, these areas are now producing some of the fastest increases in land prices.”

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Perth recorded the most dramatic jump, with lot prices rising 29.8% to a median of $375,000. Hobart followed with a 20.8% increase to $320,000, while Brisbane saw prices climb 9.2% to $366,300. Adelaide rose 8.2% to $292,000.

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Meanwhile, Australia’s two largest markets saw more modest growth, with Sydney land prices rising 2.8% to $689,500 and Melbourne increasing 2% to $382,500.

The widening gap between land prices and inflation signals growing affordability pressures, particularly for first-home buyers and developers trying to deliver new housing stock. With demand continuing to outstrip supply, industry leaders caution that sustained price growth could slow construction activity and undermine efforts to ease Australia’s housing shortage. For investors already in these markets, however, the outlook suggests strong capital growth.

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Reardon emphasises the need for coordinated policy action to improve land supply and streamline planning processes. “Without addressing the structural constraints on land release,” he said, “meeting national housing targets will become increasingly difficult.”

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As population growth and migration continue to fuel demand, the cost of residential land looks set to remain a key driver — and challenge — within Australia’s housing affordability landscape. In today’s climate, having expert advice to ensure you are not overpaying for land is crucial. Where you buy will also have a significant impact on long-term growth outcomes.

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