The type of housing cost that just soared 75 per cent in five years
The median development site cost has risen from $4.8 million in 2020, to $8.5 million this year, Ray White analysis of Real Capital Analytics data shows.
It comes as construction costs remain elevated from their pre-COVID-19 levels, putting further pressure on affordability.
Ray White Group chief economist Nerida Conisbee said it would take considerable time before building costs fell enough to make new housing genuinely affordable for average buyers.
'Land costs haven't come back down and what's happening is developers want to build, but they can't do it affordably,' Conisbee said. 'We're not seeing the crashes in the market we previously saw so we're in a kind of holding pattern.'
In past economic downturns, rising interest rates would put pressure on some owners of development sites, forcing them into distressed sales at reduced prices. But this time was different, and Conisbee said many had built financial buffers while interest rates were at record lows, and developers have been in a better position to hold onto land.
They were also entering into joint ventures when finances were squeezed. Changes to how lenders operated were also helping developers hold on to their assets, banks were holding off on forced sales for struggling developers, and were more likely to offer relief measures.
It comes as the federal government aims to deliver 1.2 million homes in five years to address the housing affordability challenge.
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Sydney Morning Herald
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The Age
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Perth Now
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