Urban Containment: Land Price Up 5 Times Income & Smaller

The shocking extent to which urban containment policy (urban consolidation policy) is associated with higher land (and house) prices is illustrated by a recent press release from RP Data in Australia. The analysis examined the vacant building lot prices for the period of 1993 to 2013.
During the period, the median price of a vacant lot rose 168 percent after adjustment for inflation. This is nearly 5 times the increase in the median household incomes of the seven largest capital cities (Sydney, Melbourne, Brisbane, Perth, Adelaide, Canberra and Sydney).
But it gets worse. The median lot size was reduced nearly 30 percent. This should put paid to the myth that urban containment reduces lot prices as it reduces their sizes (Figure). The same dynamic has been indicated in the United States.

Australia has been plagued by huge house cost increases relative to incomes in association with urban containment policy. Before the adoption of urban containment policy, it was typical for house prices to average three times or less than that of household income. Now, Sydney has the highest median multiple (median house price divided by median household income) of any major metropolitan area in the New World, with the exceptions of Vancouver and San Francisco. Melbourne, the second largest metropolitan area in Australia, has a median multiple of 8.4, making it fifth most costly in the New World, behind San Jose. All of Australia's major metropolitan areas "severely unaffordable," including slow-growing Adelaide (6.3), as well as most smaller areas.
For a complete listing of median multiples by major metropolitan area, see the 10th Annual Demographia International Housing Affordability Survey.
Additional information on the RP Data research is available at Australian Property Through Foreign Eyes