Land prices rising in Perth

Although housing market activity in Perth has been generally subdued over the past year, the price of residential building blocks has continued to rise.

Perth recorded a median residential land price of $290,000 over the September quarter which was an increase of 5.6 per cent over the quarter and an increase of 10.3 per cent over the past year.

Relatively high numbers of first home buyers continue to support demand for new housing with prices growth for land a clear consequence.

Although Perth land prices have increased recently, they remain relatively affordable, particularly compared to the Sydney market where the median land price now stands at an extraordinary $450,000.

The most popular suburbs for land sales over the six months ending September were Baldivis with a median of $218,000, Alkimos $232,875, Wellard $230,000, Byford  $207,000 and Aveley $269,750.

Low and falling interest rates have provided some stimulus to the housing market this year however this has been offset by the contraction of the local economy and fragile confidence.

However, recent signs are that the economy is improving and the housing market may be bottoming out and setting a foundation for some growth next year.

This week the Reserve Bank met for the final time this year and, reflecting generally better recent economic data, official rates were left at the record low 2 per cent.

Rates will now be on hold for eight consecutive weeks until the bank meets again in February 2016.

But as revealed in recent months, mortgage rates can move independently of Reserve Bank settings and with this week reports of deposit rates being cut to below 2 per cent.

Dr Andrew Wilson is Domain Group Senior Economist Twitter@DocAndrewWilson​