In Sydney, the median price of a new land lot rose $100,975, or an incredible 29.7%, to $440,725 in 2015, according to The Urban Development Institute of Australia's 2016 State of the Land Report.

Across Australia's five largest capital cities, the average median cost of a new lot of land rose 1.4% over the year to $250,658, a rise of 14.8% since 2010, the report says. 

While prices are rising, the average size of a new land lot has shrunk to 453sqm, a 4.3% contraction over 2015, and a 12.2% decline since 2010.

The UDI report claims that rising government and council charges are pushing costs higher, forcing land prices higher and prompting developers to offer smaller lots. However, broad community acceptance of smaller blocks has also played a role.

The rise in prices comes despite a record number of new lots being released in 2015, with 55,656 new lots released, up 9.9% from 2014, and up 43.6% from five years ago.

The UDIA is recommending that governments at all three levels move swiftly to remove uncertainty about future regulation, and deliver a stable regulatory environment that encourages supply of and investment in new land.

UDIA president Michael Corcoran said, “Changes made to the macroprudential regulations and foreign investment rules, and speculation over tax changes like the GST, negative gearing and capital gains tax, and talk of imposing ‘value capture’ have the potential to cause perverse effects in 2016 along the eastern seaboard, and highlights just how susceptible the property market is to uncertainty in the policy environment.

“At the state level, improvements have been made in recent years to allow the market to better respond to conditions. But delays and uncertainty in the rezoning, planning and approvals processes mean volatility remains in-built in the industry, as it remains difficult to respond quickly to changes in demand, while up-front charges and levies remain too high,” he said.

The UDIA represents the urban development industry in Australia.

See also:

Aboriginal Land Council making most of Sydney property boom