The dream of owning a home seems increasingly out of reach for many Australians, and a new report reveals why: skyrocketing land prices. The latest study from the Housing Industry Association (HIA) shows that land prices have surged far more than construction or labor costs, and it’s now a major roadblock to building new homes. The question is, how did we get here, and what can be done about it?
The Real Cost of Land
According to the report, land prices have risen three times faster than construction and labor costs since 2000. To put it simply, it’s the land itself that’s driving up housing prices. It’s not just about the “dirt” as the report puts it, but the cost of getting that land ready for housing—everything from zoning and rezoning, to adding necessary infrastructure like roads, water, electricity, and sewage systems. These costs, however, aren’t covered by the government’s budget but are passed on to the buyers through taxes, levies, and fees.
Tim Reardon, chief economist for the HIA, explains that much of the increase in housing costs can be attributed to how governments release, service, and tax land. These costs are absorbed into the land value, which makes new housing more expensive, ultimately pushing homeownership further out of reach for many.
The Challenge of Greenfield Land
The situation is even more alarming in areas like greenfield sites (undeveloped land on the urban fringe). From 2000 to 2025, the average price of these lots has jumped more than sixfold, an increase that is unsustainable for many first-time homebuyers. At the same time, experts point out that land scarcity is an issue compounded by regulation and planning processes that can take years to clear.
While some argue that these regulations are essential to prevent unregulated growth, others feel they are a key reason housing affordability is slipping further away.
Is It Time to Rethink Our Urban Planning?
One suggestion that’s gaining traction is to rethink how we build. Dr. Michael Fotheringham, from the Australian Housing and Urban Research Institute, advocates for higher-density housing as a way to deal with the lack of affordable land. This could mean building apartment complexes or townhouses instead of traditional detached houses. While many Australians cherish the idea of a detached house with a backyard, Dr. Fotheringham points out that this model is increasingly difficult to sustain as urban areas expand.
However, Professor Libby Porter, an urban researcher at RMIT University, warns that land is highly constrained, influenced by factors like topography, flood risk, and bushfire zones. She cautions against loosening regulations too much, fearing that could lead to the construction of homes in areas more vulnerable to natural disasters, reports ABC News.
A Long-Term Solution?
The government has begun to address these challenges. In the latest federal budget, a $1 billion commitment was made to fund road, water, and energy infrastructure in partnership with state governments. While these investments are a step in the right direction, experts suggest that real change will take years, and the housing affordability issue is not going to be solved overnight.
Ultimately, Australians may need to reconsider how and where we live to overcome the housing crisis. While land prices continue to rise, the focus needs to shift towards smarter urban planning and more flexible housing solutions to keep up with demand—and the hope is, with time, things may start to change for the better.
