8 minute read
Real Estate
Huge demand for land drives values towards $3 trillion
“The increase in Australia’s residential land values in 2021 was broad-based, with sharp increases recorded across every state and territory, resulting in the total value of residential land increasing by about a third, which is a remarkable increase given the recessionary conditions we have been through at times,” according to Pete Wargent of BuyersBuyers.
This is consistent with the Australian Bureau of Statistics that estimated that the value of residential land in Australia has increased from $4.9 trillion to $6.6 year.
However, homebuyers should understand how to interpret the headlines, according to Pete Wargent, co-founder of Australia’s for buyer’s agents, BuyersBuyers.
Mr Wargent said, “at face value, there has been a huge increase in the value of residential land, more than doubling over the past eight also be recognised that more land will is being released and used for residential purposes as the population grows over time, so a good part of the increase in land values is baked in.”
“The demand or land for residential property purposes is exceptionally high right now. We expect to see a further increase in land values, and consequently, free-standing houses are highly likely to enjoy strong capital growth in the long term, in most of the established areas and landlocked suburbs in the country.”
Coastal land values outperforming
Doron Peleg, CEO of BuyersBuyers said that the growth in Australia’s population has been a key factor in rising land values, alongside structurally lower interest rates and an increase in Australian household wealth.
Mr Peleg said, “take the state of New South Wales, where the estimated resident population has increased by round 3 million over the past four decades, while the average number of persons per household has declined residential land”.
“Although population growth in the state has slowed dramatically through the pandemic, there was a very rapid run-up from around 2006 onwards through the mining boom years and beyond” Mr Peleg said.
Population of NSW
“Australia’s economy has mostly been a success story over recent decades. The recent strength in land values has been driven primarily by coastal and lifestyle locations, as wealth as prime harbourside suburbs, as working arrangements and sought more space over the past two years.”
“We expect that the demand for land will remain strong, and land values are highly likely to deliver strong price increases, particularly in the long term” Mr Peleg said.
NSW land values set to pass $3 trillion
Mr Wargent, co-found of BuyersBuyers said: “Warren Buffett said that when you’re buying stocks you should think about buying part ownership of a business. It’s a slightly different proposition when you’re dealing with residential land, because most market participants are buying homes to live in rather, than purchasing purely as an investment for the economic value, although you can apply similar principles.”
Mr Wargent said: “the value of residential land in New South Wales hit A$2.67 trillion in the 2021 to the Australian Bureau of Statistics estimates.
For some interesting context, Apple became the be valued at a US$3 trillion market capitalisation earlier this month”.
“To put that another way, and to paraphrase the great man Mr Buffett, for the same value of the Apple business today you could buy all of the residential land in the New South Wales and still be left with about a trillion Aussie dollars or so of walking around money.”
“Buffett also says that he likes to buy stocks with the assumption that the market could close next day and not open again for 10 years - and that’s not a bad mindset for property buyers to take either”.
“The total value of Australian residential land may appear to be at nosebleed levels at $6.6 trillion, but land values always feel expensive, and they will be much higher a decade or two from now” Mr Wargent said.
“A key drawcard for longterm investors in land and property is the survivorship factor. Apple is a wonderful business, no doubt - but nobody can say for sure which companies will be the most valuable in another four decades from now.
“40 years ago in 1980 the largest corporations list was dominated by Big Oil and energy, Ford, General Motors, and IBM, for example, but the economic landscape has shifted dramatically away from the dominance of these businesses”.
“Property will continue to go through cycles, but welllocated residential land in cities such as Sydney and the desirable coastal suburbs of New South Wales will still be in extremely high demand 40 years from now, hence its enduring popularity”.
“However, you need to know where to buy, as not every property on a large piece of land will deliver strong price appreciation – a forward-looking view and detailed analysis is required to identify sound opportunities in this highly competitive market,” Mr Wargent said.
20 NSW suburbs where it’s almost
New research commissioned by Well Home Loans has that have a maximum of three vacant rental properties.
Interestingly, all 20 suburbs turned out to be regional – none were located in Sydney.
Casuarina ranked number Tweed Heads South at 5, Tweed Heads West at 6, and Pottsville at number 7.
East Lismore made an Yamba slipped in at number 20.
Every suburb on this ranking had only one, two or three vacant rental properties when the research was conducted in December. To qualify as ‘vacant’, a property had to have been advertised criteria were also used: had a legitimate rental market, suburbs were Well Home Loans CEO Scott Spencer excluded if they had fewer than 500 rental properties. had a tight rental market, suburbs were excluded if days on market were 20 days or above. accommodation in markets nearby, suburbs were (The Australian Bureau of Statistics refers to a cluster of suburbs as a ‘statistical area
That ensured neighbouring suburbs also had tight rental markets. itself had a legitimate local dwellings were rental properties. had a strengthening rental if weekly house rents had previous year.
The result was a small list of NSW suburbs that had legitimate rental markets and where tenants were competing the hardest for available homes.
To establish a top 20 ranking, suburbs were then ranked based on the highest change in house rental rates
Well Home Loans CEO said there are two different stories playing out in these 20 suburbs, with investors in a strong position and tenants in a weak position.
“If you’re an investor in a suburb that contains only three vacant rental properties, tenants have to compete hard for your property, which gives you the chance to push up rents,” he said.
“Conversely, if you’re a tenant, life is really tough, accommodation and you know rents are climbing fast.
“To make matters worse, all the suburbs in this report are in areas with very low vacancy rates, so even if tenants were prepared to move one or two suburbs hard to secure accommodation. That gives investors considerable market power.”
Mr Spencer said tenants in these suburbs might want to consider buying, especially if rents had increased to a point where they were now more expensive than mortgage repayments.
That said, Mr Spencer noted that some of these suburbs had high levels of disadvantage, as measured by the Australian Bureau of Statistics, which would make it hard for local residents to get onto the property ladder.
“Tweed Heads South and Tweed Heads West, for example, are located in an area in the bottom decile, which means their area is more disadvantaged than South Wales. That makes it hard for tenants to afford rising rents and to save a deposit,” he said.
“Conversely, Casuarina is located in an area in the top decile, which means their area is less disadvantaged New South Wales. So they with the big jump in local rents and to get onto the property ladder.”
Applications for land tax relief will be extended until February 28 to give eligible commercial and residential landowners more time to access the program.
Minister for Finance Damien Tudehope said the land tax relief was designed to make it easier for landowners who supported their tenants during a challenging year.
“Extending the deadline for landowners to access land tax relief will give people more time to get the necessary documents together and access any help they may need to complete an application,” Mr Tudehope said.
“Many renters, commercial and residential, had a with reduced turnover or work hours due to the
“We heard from landowners that they wanted to help their tenants, but they also have bills to pay. Providing land tax relief enabled them to work with their tenants to offer rent reductions and to alleviate some of the cost-burden during restrictions.
“In response, the NSW Government is helping commercial or residential landowners who have reduced their tenants’
NSW landowners may be eligible to receive a per cent of their land tax tax year if they provided a reduction in rent to a
This package follows a similar program run for the 2020 land tax year, which saw more million of relief provided.
Minister for Small Business and Fair Trading Eleni Petinos said the Government was always committed to assisting those in need.
“We know this program has previously helped to keep businesses in business, people in jobs, and roofs over heads,” Ms Petinos said.
“That’s why we are extending this package to ensure landlords can continue to provide relief to small businesses and residents while we get through this challenging period.”
To be eligible for land tax relief, a landowner must be leasing to a commercial tenant who has a turnover up to $50 million and has been deemed eligible for NSW Government or a residential tenant who has lost 25 per cent or more of household
The landowner must have reduced rent for the affected tenant for any requirement for it to be paid back.
Landlords can also access the Commercial Landlord Hardship Fund, which provides small commercial or retail landlords with a monthly grant up to the value of any rental relief provided, to a maximum property. To be eligible, a landlord cannot claim land tax relief for rent reductions provided to for the Commercial Landlord Hardship Fund
Applications for Land Tax Relief can be submitted at www. service.nsw.gov.au/ transaction/apply-covid
For more information on rent relief visit: for commercial and residential landlords Service NSW.
