Sydney land market has peaked: BIS

The Sydney residential land market is estimated to have peaked in terms of prices as well as lot production over 2016/17, according to BIS Oxford Economics.

Constrained affordability (the worst across all cities), the erosion of the dwelling deficiency as well as regulatory measures aimed at cooling investor activity have all played a part in reigning in demand.

“Rapid growth in the median house price was not matched by the rises in the median land price over the three years to 2014/15, improving the equation for the purchase of new houses relative to established stock,” said BIS Shrapnel’s senior manager of residential property market research Angie Zigomanis.

“However, land prices saw significant growth over 2014/15 and 2015/16, narrowing the gap and driving some demand back into the established market.”

As such, demand for new houses is expected to have topped out. A total of 11,200 lots were released in 2016/17 with this forecast to be a record high.

Despite the expectation of a downturn, the fall in lot production is likely to be moderate.

Off-the-plan purchases occurring in the current market, as well as low interest rates, will provide some support for lot production and land prices, as will a greater deficiency in the detached house market relative to the Sydney apartment market.