Setting pressure on new home buyers, residential land sales in Melbourne plummeted to their lowest while the price of blocks increased by 13 plus percent in 10 years.

In December 2010, land sales on the city borders dropped by 50.1 per cent in comparison to 2009’s sales in the same quarter.

According to HIA-RP Data Residential Land Report, the median land value increased by 1.5 per cent to $220,000 per lot at the same time. This is the highest national growth which made Melbourne the third most expensive capital city to buy land in Australia.

Reports show that only three out of 10lots for sale in new residential lands across Australia were obtainable to average-income first home buyers.

According to HIA economist Matthew King, ''The escalation in land values highlights an ongoing deterioration in new home affordability.”

King explained further, “The sharp drop in land sales followed similar declines in the previous September quarter and points to new home building activity being very weak this year.”

New home lending chopped down by 7 per cent, housing agreements dropped 3.2 per cent, and commencements were down by 5.3 per cent during several months before February.

With fewer sales and higher prices trends manifested across Australia, median land values jumped by 4.1 per cent to $194,161 over the quarter.

Sydney remains the most costly city to buy residential land with a median value of $269,900. Next are the Sunshine Coast and Perth with a corresponding median land value of $240,000.

''As long as we fail to meet the underlying requirements for new housing, rental markets will remain extremely rigid, and future home buyers will be increasingly deterred by poor housing affordability,'' HIA reported.

Population boom and slow land supply in Australia appear unfavorable to the cost of new housing during the growth period as shown by the details from HIA.

In spite of this, first home buyers may get some relief, with current numbers showing a 6 per cent drop in the median house price in Melbourne in the three months to March as presented by Real Estate Institute of Victoria.