Small uptick in residential land sales activity might bouy retail: HIA- RP Data

Residential land sales remain at low levels, but sales look to be climbing off the mat, which may flow through to improved retail conditions, according to the HIA-RP Data Residential Land Report.

“It’s a long climb back, but at least we have now seen three consecutive quarters in which land sales volumes have increased, although there is no avoiding the fact that overall levels remain low,” says HIA senior economist Andrew Harvey.

The report found the volume of land sales increased by 1.3% in the September 2011 quarter although volumes were 16.8% lower than in the September 2010 quarter and substantially lower than the September 2009 peak.

“Land sales are an early leading indicator so an upturn in trajectory is essential to the prospect for an eventual recovery in new home building activity – although we really do need much higher sales levels to make a material difference,” Harvey says.

“Having land sales still at less than half the September 2009 peak speaks for itself in terms of how far the market has come off and adds to the already strong case for stimulatory policy, both in terms of further rate cuts and fiscal measures to stimulate new home building,” Harvey adds.

“Any improvement in land sales is an encouraging development for the housing construction industry, while there are also positive flow-on affects,” RP Data senior research analyst Cameron Kusher says

“When people build a new home they typically purchase furniture and homewares, buy new electrical goods and spend money on hardware. Should the improvement in land sales continue it is likely to provide a much needed boost for retailers,” Kusher says.

The weighted median land value in Australia grew by 0.5% in the September 2011 quarter to be 1.7% higher than in 2010.

The median value for capital cities land rose by 1% in the September 2011 quarter to $213,718, or 2.5% higher than one year earlier.

The median value for regional land eased 0.7% in the quarter to $154,989, to be up by 0.2% on the same time in 2010.

Kusher says the result is encouraging, but he cautions that the market still has a long way to go.

“Following the low point in sales activity in the December 2010 quarter there has been a noticeable improvement in the number of vacant land transactions.

“It is also important to remember that the improvement commenced at a time when many expected that official interest rates would climb higher.

“With successive 25 basis point cuts to interest rates in November and again in December 2011, we would expect that a steady improvement in sales activity which commenced in the December 2010 quarter is likely to continue and perhaps gather further pace.

“However, we believe the market still has a long way to go to return to healthy levels,” Kusher says.