Rising land prices threaten new home building

The average price of a block of land rose by a massive 14 per cent last year to reach $185,222, new figures show.

According to the latest residential land report by the Housing Industry Association (HIA) and rpdata.com, such a rise is threatening the recovery in new home building at a time when there is a severe shortfall in supply.

Land prices rose at their fastest pace since mid-2004 last year while the volume of land sales fell by 4.6 per cent in the final quarter of 2009 compared to the same period in 2008.

HIA chief economist Harley Dale suggested that such a trend will put more pressure on people to compare home loans as it becomes increasingly difficult to secure an affordable property.

"If this situation continues then the recovery will stall, the housing shortage will worsen, and there will be upward pressure on rents and on existing home values that could have been avoided," said the specialist.

Meanwhile, rpdata.com national research director Tim Lawless called on policymakers to provide additional residential land which is both affordable and close to necessary amenities.

This week, Martin North, managing consulting director of Fujitsu Consulting, told the AAP that first home buyers are now putting aside an average of between 40 and 45 per cent of their income for mortgage repayments.

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