The cost of land in greater Adelaide has surged once again, with the average price of new home sites nearing $300,000, putting further strain on the already challenged homebuilding sector. According to the latest market insight report from Real Estate Services Group Oliver Hume, the price of residential land across Adelaide rose by 8% in the December quarter of 2024, reaching a median price of $295,000. On an annual basis, the price increase was a substantial 15.69%, amounting to an additional $40,000 per site.
The report, which analyzes thousands of land sales across key Australian markets including Victoria, South East Queensland, and Adelaide, highlights a troubling trend for homebuilders. The land price increases were widespread, with the steepest growth recorded in the Onkaparinga, Playford, Adelaide Hills, and Alexandrina regions. However, the growth in land prices can largely be attributed to the changing size and type of lots available, signaling a shift in the dynamics of land offerings in these areas.
Supply Struggles and Falling Sales Volumes
While land prices continue to climb, the volume of land sales has declined significantly, with the most notable drop occurring in Playford and Onkaparinga. Experts attribute this downturn to stock shortages in key developments and challenges related to engineering and infrastructure, particularly water availability in the north and other constraints in the south. As a result, land sales in 2024 were lower than in the previous two years, signaling a tight market.
Oliver Hume’s Chief Economist, Matt Bell, noted that the robust demand for land, coupled with restricted supply, is continuing to push prices higher. He emphasized that Adelaide’s relative affordability compared to other major Australian cities like Melbourne and South East Queensland, coupled with the city’s low rental vacancy rates, has contributed to this demand. “Despite a sharp decline in sales volumes, demand remains strong,” Bell said. “The recent price growth reflects Adelaide’s affordability and the growing housing shortage.”
A Positive Outlook for 2025
Despite the current challenges, Bell remains optimistic about the Adelaide land market’s future. With a solid local economy, relatively low land costs, and a high quality of life in South Australia, he expects both sales volumes and land prices to rise in 2025. The forecast is supported by the possibility of interest rate cuts, which are expected to improve buyer sentiment and encourage more supply into the market. Bell also highlighted Adelaide’s position as one of the most affordable markets in Australia, which he believes will attract both local and interstate buyers in the year ahead.
Affordability Challenges Remain
Julian Coppini, CEO of Oliver Hume, discussed the affordability issue at a recent UDIASA event, pointing out that supply restrictions are the primary driver of the increasing land costs. Coppini stressed the importance of addressing these supply issues in order to improve affordability in the Adelaide market. “At its core, supply is key,” he said. “We are encouraged by the progress being made, but the challenge remains significant.”
As land prices continue to rise in Adelaide, the future of homebuilding in the region remains uncertain. While the outlook for 2025 remains cautiously optimistic, the ongoing challenges related to supply, infrastructure, and affordability will continue to be critical factors in shaping the market’s trajectory.
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