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Building Homes Could Reduce Housing Prices, Says Expert

Buying a house is the ultimate Australian dream, but not everyone can afford to fulfill the dream in one of the most expensive counties in the world.

Affordability is still the number one concern about homebuyers in Australia and even though lenders and policymakers are continuously relaxing policies to ensure that the housing market remains accessible, in cities like Sydney and Melbourne, people are spending an average of 8.2 years to save for a 20 per cent deposit on a median-priced home.

So what more can policymakers do to make the market more affordable for potential homebuyers? One expert suggests freeing up more land to promote home construction.

The Executive Director of Housing Industry Association (HIA), Fiona Nield, suggests that housing prices could decrease if policymakers freed up more land to build new homes

Shortage of Land Supply

The Executive Director of Housing Industry Association (HIA), Fiona Nield, says that buying a house in Sydney or Melbourne is out of reach for most middle and upper-middle class families because of the shortage of affordable housing stock in the market. She says that policymakers can counter the problem by freeing up more land in metropolitan areas for constructing new homes.

HIA is a market leader in providing shovel-ready land to new homebuyers with lower construction charges and taxation, but with shortage of land supply in Sydney and Melbourne, housing associations are forced to raise plot prices which are preventing new homebuyers from entering the market.

Nield commended Liberal Party’s opposition leader Matthew Guy’s plan for freeing up 300,000 vacant plots in Melbourne’s fringe areas as part of a political campaign which would have a positive effect on housing development in the city. Availability of more land will also decrease construction charges and punitive taxes – a favorable move for new homebuyers who will have to pay less upfront costs.

Booming Construction Industry in Victoria

Nield explains that due to the current land shortage, homebuyers are requires to wait for at least two years before their homes are built. The housing industry in Victoria, Melbourne is producing a large number of homes which is strengthening the Victorian economy as well as creating more employment opportunities in the industry.

Currently, one out of ten people living in Victoria are working in the construction industry. Housing affordability is a crucial factor for keeping the industry alive and one of the ways policymakers can ensure that is through providing better access to labor, land and resources required for building new houses.

A new analysis of property costs also shows that an increasing number of homebuyers are considering building their own house to save thousands of dollars. Expert Bessie Hassan from says that taking costs like stamp duty, plot prices, taxations and state-provided grants into consideration, building a house can cost around $200,000 in Melbourne and $360,000 in Sydney. But even though the strategy sounds too good in theory, finding a vacant plot in the established suburbs is more difficult than it seems.

In Sydney, homebuilders can find vacant blocks of land of 300 square meters for $390,000, but these outer suburbs are generally 45 kilometers away from the CBD

Building Your Own House

Building your own house does offer several long-term financial incentives since it attracts lesser premium than established properties in metropolitan areas. But the closer you get to the city, the more expensive the land gets, therefore reducing the economic benefit of building a house instead of buying one.

In Sydney, homebuilders can find vacant blocks of land of 300 square meters for $390,000, but these outer suburbs are generally 45 kilometers away from the CBD which is why it is important to ask yourself before starting a development project if living so far away from the city suits your lifestyle. But even though building a house is much cheaper than investing in an established property, land prices have also increased in Sydney and Melbourne during the recent housing boom.

Plot prices in Sydney have jumped $100,000 over the past year where Melbourne has only seen a $10,000 price increase over the same period. Michael Corcoran, the president of UDIA says that the rising home prices across the country are fueled by heavy taxes, which account for 40 per cent of the cost of building a new house or apartment.

But building a house isn’t just about making a financial investment but also about emotional and time investment since renovation projects often take years to complete and are subjected to several disruption factors during the process.

Do you think building a house is a better investment than buying one?


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  1. Moona1785

    July 12, 2018 at 8:40 pm

    ‘The truth’ is credit it too cheap, there aren’t enough affordable houses, there are no rent controls and loan controls are too lax.

  2. House434

    July 13, 2018 at 7:23 am

    I think this can help the Australians to have more options to purchase their dream home. Kudos to Guy!

  3. Micronomics100

    July 13, 2018 at 9:30 am

    Wow, I guess we have it good in America, huh? Those prices are quite steep considering the Australian and American dollar are more or less the same!

  4. WBC-1146

    July 13, 2018 at 11:30 am

    I just hope the lands they’ll give will be more accessible to our workplace and the city. It’s a hassle to commute in long-distance places.

  5. Aussieborn91

    July 13, 2018 at 2:32 pm

    It’s surprising to see that in a country as vast as Australia, population pressure is causing land rates to skyrocket in suburban areas. Guess my only bet now is to move to the Outback…smh 🙁

  6. Sophia Kunis

    July 13, 2018 at 5:34 pm

    It’s great to see that the government is addressing this land inflation issue. Hopefully, they can have it sorted out soon enough so that we can get housing at decent rates 🙂

  7. Bhatti987

    July 13, 2018 at 8:42 pm

    If brexodus continues there won’t be enough labor to build the homes we need.

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