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Surge in outer area land costs

For the first time on record the median cost of land in the outer growth area suburbs is likely to eclipse the cost of building a house, research shows.

The median land price in Melbourne's growth areas such as new suburbs Wyndham, Whittlesea, Casey and Melton rocketed 24 per cent in the past 12 months to $212,750 last quarter.

According to research from property group Oliver Hume, the cost of building a new home has risen to $216,097, leaving a gap between the price of land and constructing a new house of just over $3000.

As population grew and demand increased, land prices were likely to exceed the cost of building by the end of the year, Oliver Hume research manager Andrew Perkins said.

Rising land costs in Melbourne's cheapest suburbs were likely to exacerbate the crisis in housing affordability, while pushing up the price of an average house and land package on the city's fringe to $428,847.

In June the Brumby government released 43,600 hectares of land - 24,000 suitable for development - along growth corridors to boost land supply and pave the way for 134,000 extra homes.

''Single-income households, which equate to around 15 per cent of all growth area buyers, cannot afford to enter the market,'' Mr Perkins said.

Master Builders Association chief executive Brian Welch said there was a lack of awareness of the housing affordability crisis. ''The most basic thing, which is accommodation, is not given the attention that it deserves,'' he said. Despite the urban growth boundary expansion, the state government failed to maintain an adequate buffer of land supply, he said.

''[It's] little surprise … we're seeing an escalation in the price of land because there is too little available for sale.''

A spokeswoman for Planning Minister Justin Madden said the government had released four new suburbs (31,600 lots) in the last two weeks to ease supply, which she said would ''have a major impact on housing affordability in growth areas''.

Opposition planning spokesman Matthew Guy said a Liberal government would review the urban growth area boundary every two years, audit government land suitable for development and abolish the current system for new city-fringe suburbs. ''The affordability question [is] the greatest challenge for Melbourne's planning future,'' he said.

Oliver Hume research found rental vacancy rates in outer suburbs dropped to 0.8 per cent, below other metropolitan areas, while the average weekly rent for a three bedroom house rose 7.8 per cent.

 

This article by Simon Johanson appeared in the Property section of Domain, The Age.com on 10/11/2010.
Disclaimer – Housing Investment Australasia Pty Ltd. The information contained in this article does not constitute formal advice, endorsement or commitment by the author or by Housing Investment Australasia or its subsidiaries.  Readers are advised to seek independent advice regarding any opinions, conclusions and other information in this article. Housing Investment Australasia Pty Ltd does not accept liability for any loss or damage that may result, directly or indirectly from any advice taken from this article.

 

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