Sydney Residential Land Market

November, 2019 – Increasing take-up indicates the Sydney residential land market is beginning to recover.

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The Sydney residential land market recovery is underway. We are starting to see land take-up rates increase and lot prices are starting to show signs of rising in Sydney.

A Platform for Recovery

Just six months ago the residential land markets in Sydney had virtually ground to a halt. It was gripped by election uncertainty, oversupply in some areas, tight lending practices driven by APRA restrictions, declining house prices and a deteriorating economy. Today, while economic concerns remain, many of the other factors have gone by the wayside and the residential land market is in recovery. We have already started to see takeup rates increasing and lot prices are rising in some areas of Sydney.

While the start of the recovery can be identified as the federal election result, the past few months is where most of the recovery has occurred. APRA’s removal of the 7% serviceability cap to assess residential home loans to 250 basis points above the rate paid in July 2019 has added to borrowing power of most applicants. Furthermore, the driving down of the official cash rate to 0.75% from 1.5% since May has assisted in increasing affordability of home loans.



Timeline of the Land Recovery in Sydney

Timeline of the Sydney Residential Land Market Recovery


Ben Toole


View Profile > NSW

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Supply of Land

According to the Department of Planning, Industry and Environment over the five years from 2018/19 to 2022/23, there are 191,550 dwellings forecast to complete in Greater Sydney, equating to 38,300 homes per year. These estimates are based on what is happening now in terms of projects under construction, approved and planned. This level of completion represents a significant rise of 22% on the previous five years when 157,250 new homes were completed. Rising supply is likely to keep prices stable unless demand rises at a faster rate than supply.


Bar Chart of Forecast Housing Supply in Greater Sydney

  • 22% increase in number of dwellings forecast over next 5-years compared to previous 5-years.

  • By LGA most new dwellings expected in Parramatta, Blacktown, Sydney, Liverpool and The Hills.

  • Central City district to see the most new dwellings (63,450), followed by Western City District (43,150).

  • Majority of completions in inner ring are expected to be units.

  • Majority of completions in outer ring including the North West and South West Growth Regions are expected to be houses.

  • Blocks are expected to continue to reduce in size aiding affordability.

Map of North West and South West Growth Regions of Sydney

Demand for Land

In the December quarter 2018, the median lot price for land in Sydney fell to the lowest point in the current cycle recording a 5.3% decline over the quarter and a 10.1% decline since the peak of the cycle in September 2017 at $474,000, according to HIA/Core Logic. This was quickly followed in the March quarter 2019 by a drop in already low residential lot sales, which sank to a new record quarterly low. This period is now considered the nadir of the land market in Sydney in the current cycle.

Demand for land has increased in Sydney over the past six months. This is starting to drive a rise, albeit slight, in median lot prices of 0.94% from December 2018 to June 2019 according to HIA/Core Logic (latest Residential Land Report). A further rise is expected when the September results are released.

Drivers of the turnaround in demand for land in Sydney include:

  • Reduced cost of debt, driven by interest rate cuts has increased the purchasing power of potential purchasers.
  • APRA’s removal of the 7% serviceability cap in July 2019 to assess residential home loans and changed to 250 basis points above the rate paid has added to borrowing power of most applicants.
  • Smaller lots sizes leading to more affordable lots (250-300 square metres) which have been taken-up quickly and are considered affordable for first home buyers. Lot sizes in Sydney averaged 454 square metres at June 2019, according to the latest HIA/Core Logic Land Report. The average lot size in Sydney is likely to fall over the remainder of the year with lot sizes in many new subdivisions in the growth precincts now averaging 300 square metres.
  • While sentiment has started to improve in the apartment market with changes announced in October of building reforms, a new registration system for the industry and developers being forced to comply with “declared” building designs. The apartment market has spent most of the year in abeyance. This was exacerbated by oversupply in some areas at the time of the fall in demand. The land market was a beneficiary attracting some owner-occupiers due to it being seen as a safer alternative.
  • Pent up demand for land markets surrounding Western Sydney International (Nancy-Bird Walton) Airport. The market is waiting for rezoning of rural land to residential surrounding the proposed Aerotropolis Core and Flexible Employment Land areas. There has been significant enquiry for land with potential rezoning uplift with large parcels having already been optioned for purchase.
  • The median Sydney house price increased by 4.8% over the September quarter to $1,079,000. This uplift is likely to drive further demand for land in the Sydney market over the short-term.

Take-up Rates

In terms of the land market, most land in Sydney is available in the North West and South West growth regions. Between September 2018 to May 2019 take-up rates for land were minimal, averaging 0-2 land lot sales per month (per project stage). Since the Federal election in May 2019 investor confidence started to rise and land sales increased dramatically. This was also assisted in June with defects found in Mascot Towers confirming that the Opal Tower defects where not a one-off and confidence in apartment developments slumped resulting in some investors and owner-occupiers considering housing estates.

Sales are now stabilising at around 3-4 lots per month across both the growth regions with 6-8 lots sales per month within subdivisions in close proximity (2 kms) of existing railway stations. The rate of sales is also dependent on developer reputation, the size of the subdivision, choice of land lots and if works have commenced. There is still room for growth with rates still not back to the levels reached in 2016 and 2017.

Looking specifically at the North West Growth Region this region has seen greater demand than the South West due to established transportation services and the introduction of the new Northwest Sydney Metro. Areas such as Box Hill, Schofields and Marsden Park have seen greater sales rates and higher prices on land lots due to the area having greater/more completed estates.

In the South West Growth Region, overall price points achieved are slightly lower than the North West Growth region. Areas such as Leppington and Austral are still achieving higher price points than the majority of the Region due to proximity to the Leppington Railway Line. Cobbitty is experiencing growing sales rates with new stages coming on-line.


Bar Chart of Maximum Lot Take-up in Sydney Growth Areas

  • Take-up of lots has improved significantly over the past year with growth being particularly strong since the Federal election in May.

  • This time last year, infrastructure wasn’t a factor in lot take-up in the growth regions.

  • Lot take-up is now 3-4 lots per month in Sydney’s growth regions with take-up of 6-8 lots per month in close proximity to the train stations.

Pricing of Land

Sydney is the most expensive capital city in Australia. HIA/Core Logic is reporting a median lot price of $430,000 in their latest June quarter 2019 Land Report. While this has decreased substantially since the market peak in the September quarter 2017, it has risen slightly over the six months to June 2019. Land value price correction provided by rebates and incentives introduced in late 2018 was short-lived. Developers have held their ground on pricing with values now stabilising and rebates and incentives being removed.



Line Chart of East Coast of Australia Median Lot Prices


  • The gap between Median Lot Prices in Sydney and Melbourne decreased substantially since June 2018.

  • From peak to trough Sydney saw the greatest fall in Median Lot Prices of the East Coast markets falling 10.1% from September 2017 to December 2018.

  • Brisbane fell 5.2% from September 2016 to December 2018 and Melbourne fell the least (1.4%) from June 2018 to March 2019.


Population growth and household formation is a key driver of demand for dwellings and residential land. In Sydney, the population is estimated to be over 5,300,000 in 2019, according to the ABS, and it is expected that it will grow by between 1.7% and 2.3% per annum over the five years to June 2023. This is dependent on the level of net overseas and interstate migration, fertility and death rates.

If the average household size in greater Sydney remains at the same level as the last Census, at 2.8 people per household, using an average rate of population growth, 198,030 additional houses will be required. This is around 39,600 houses per year.

Comparing this to the expected supply from the Department of Planning, Industry and Environment of 191,550 dwellings forecast to complete in Greater Sydney, or 38,300 homes per year. This means Greater Sydney is likely to see an undersupply of dwellings over the next five years.

This is likely to result in the continued reduction of lot sizes in the Sydney region and increased lot prices over the five-year outlook. While lot sale prices achieved, will continue to be higher close to transport modes it is expected to become increasingly more difficult for developers to be able to put sites together.