PERTH has overtaken Sydney as the most expensive residential land market in Australia as two property groups label the city as the "most problematic".

In the September quarter residential land report by the Housing Industry Association and RP Data, Perth was found to be the most expensive capital city in terms of dollar value per square metre at $516.

Sydney recorded $478/sqm while Adelaide was a standout performer in the September quarter, surging to $477/sqm.

In median terms, Perth was the third most expensive area with the median land value at $245,000, representing growth of 11.4 per cent on the previous quarter and growth of 8.9 per cent on the same quarter in 2009.

The city trailed Queensland’s Sunshine Coast ($280,000) and Sydney ($269,000).

The nation’s five cheapest land areas were in South Australia and Victoria, all under $100,000, with SA’s Murray Land ranked number one with its median land price tag of $82,500.

Nationally, the median land value grew 2.8 per cent to $186,629, while over the year the value was up 5.2 per cent.

The volume of Perth land sales for the September quarter plummeted 69.1 per cent compared to the same period in 2009, which the report called “disappointing”. It compares with the nation decline of 57 per cent.

The South Eastern and South West regions of WA recorded contractions of between 30 to 40 per cent.

“It would be reasonable to regard the Perth residential land market as the most problematic of the capital city land markets in Australia,” the report said.

“The decline in residential land sales volumes since the stimulus-driven peak has been more extreme in Perth than any other capital city.

“While some slowing would have been expected following a large withdrawal of first homebuyers, the state and local governments must accept responsibility for an unacceptable rate of land release in Perth over recent years.”

Aside from Perth, the South Eastern region of WA was the most expensive residential land market with a median value of $166,000. The South West region had a median land value of $165,000.

“An inability to supply new land for residential development remains the key supply side constraint on the Western Australian new home building industry,” the report said.

“With the magnitude of the ensuing second phase of the mining boom looking more gargantuan by the minute, it will be very important that the state and local govenments get planning right, especially given the horrendous affordability problem facing the State already.”

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