Over the past 12 to 24 months, the construction industry in the Hunter Region has faced formidable obstacles. The soaring costs of building materials and labor, coupled with the rise in interest rates to their highest point in a decade, have strained the market. Additionally, supply chain disruptions have further impacted the construction sector, contributing to delays and increased expenses. These challenges have had a direct impact on the market for vacant land, creating uncertainty and potential setbacks for developers and buyers.
Despite the impact of these recent events, new research is now showing that there are signs construction costs have peaked at the end of 2022 and are beginning to stabilize. According to CoreLogic’s Cordell Construction Cost Index (CCCI) a growth rate of 0.9% was returned for the first 3 months of 2023 which is level that has not been witnessed since March 2021. This figure is less than half of the Q4 2022 data which came in at 1.9% and is a significant slowdown in comparison to the Q3 2022 rate of 4.7%.
As we reach the latter part of 2023, the RBA has decided to keep the cash rate steady at 4.10%. According to experts, interest rates are expected to stabilize from August 2023 and then commence a downward trend in early 2024. This, in addition to construction costs steadying, the vacant land market anticipates a boost in activity, as investors and developers perceive a reduced level of financial risk.
The availability of government incentives benefits first-time homebuyers seeking to enter the market. These incentives, in the form of schemes and exemptions, are designed to provide financial relief and incentives for the purchase and construction of newly built homes. By stimulating demand, they have a positive impact on the solidification of land prices.
The scarcity of premium properties, particularly those boasting waterfront views or scenic vistas, also plays a significant role in maintaining robust land prices. As the availability of such properties diminishes, their desirability and market value increase. With the Hunter Region boasting limited waterfront and view properties, demand remains high, ensuring prices remain strong.
Maintaining strong land prices is also attributed to the scarcity of premium properties, particularly those offering waterfront views or picturesque surroundings. As these properties become increasingly scarce, their allure and market worth rise. The Hunter Region, with its limited supply of waterfront and view properties, experiences consistent high demand, thus ensuring the endurance of robust prices.
Adding to these factors, the Hunter Region is anticipated to undergo substantial population growth, with projections indicating an estimated population of 862,250 by 2036. This surge in residents will significantly contribute to the demand for housing, subsequently intensifying the need for residential land. Consequently, land prices are expected to maintain their strength, as developers and investors.
