Sydney Land Prices Soar: Developer Struggles and Housing Supply Challenges Intensify – Sydney Auction Clearance Rate at 73%

Week’s Key Focus

According to News Corp Australia, land prices in some parts of Sydney have surged to four times those of other capital cities, while the cost of developable land is now twice that of other major metropolitan areas. This trend has placed immense pressure on the already struggling construction industry and hindered the NSW government’s efforts to increase housing supply and address the ongoing housing crisis. The Parramatta region has become the epicenter of this price surge, with the Housing Industry Association highlighting that rising labor and material costs were already a major challenge for developers. The skyrocketing cost of land has further driven up the price of new homes, making them less attractive to buyers and suppressing demand, leading to a slowdown in housing approvals and construction starts.

Data shows that the median land price in Sydney has now reached $2,000 per square meter, far exceeding Melbourne ($1,071), Perth ($1,030), Brisbane ($938), and Adelaide ($691). Sydney also holds the highest absolute land values, with the median price of a vacant lot at $710,000, compared to $268,700 in Adelaide, $352,000 in Perth, and $395,000 in Melbourne. In Parramatta, the average price for land zoned for new housing is approximately $1.2 million, or around $4,700 per square meter, which is $1,000 more per square meter than Moreland in Melbourne’s north. Meanwhile, land prices in The Hills, Penrith, and Blacktown have climbed to $2,500, $2,000, and $2,200 per square meter, respectively—nearly three times the price of comparable areas in Brisbane, Adelaide, and Perth. PropTrack economist Paul Ryan attributes these soaring land prices to increased demand during the pandemic and delays in greenfield project approvals. However, he suggests that an interest rate cut by the Reserve Bank of Australia (RBA) could provide some relief.

Katie Stevenson, Executive Director of the Property Council of NSW, emphasized that Sydney’s persistently high land prices stem from severe supply shortages, complex planning procedures, lengthy approval delays, and excessive government charges. While the NSW government has introduced ambitious reforms to tackle these issues, she stressed the need for unprecedented urgency and commitment to remove barriers and provide greater certainty for housing development. The combination of rising land costs, regulatory hurdles, and financial strain on developers is making it increasingly difficult for the government to meet its ambitious goal of delivering 377,000 new homes by 2029, further exacerbating Sydney’s housing supply crisis.

Auction Results Last Week

Sydney: 785 properties went to auction, with 444 results reported and 322 sold, resulting in a clearance rate of 73%. The total auction value reached AUD 357,146,838, with a median house price of AUD 1,570,000.
Melbourne: 640 properties went to auction, with 466 results reported and 315 sold, leading to a clearance rate of 68%. The total auction value was AUD 245,469,450, and the median house price stood at AUD 875,000.