Sydney’s Shrinking Land: A Crisis of Affordability

Sydney’s housing market is facing a deepening crisis, not just of high prices, but of dwindling land availability. A surge in demand coupled with a significant reduction in lot sizes is driving up costs, pushing homeownership further out of reach for many and reshaping the city’s landscape. Even unconventional land parcels – driveways, easements, and sites occupied by infrastructure – are now attracting premium prices as buyers scramble for a foothold in the market.

The Shrinking Block

Over the past decade, the size of residential land in Sydney has dramatically decreased. According to the latest Housing Industry Association (HIA) Residential Land Report, the average Sydney block has shrunk by 62 square meters since 2015 [1]. This reduction is the largest of any Australian capital city. Simultaneously, the price per square meter has more than doubled, rising from $1,000 in 2015 to $2,019 in late 2025 [2], [3].

The median lot price in Greater Sydney reached $685,000 in the final quarter of 2025, a significant increase from $409,000 a decade prior [3]. Over the last 25 years, residential land prices have climbed by more than 500% [3].

The Rise of ‘Scrap’ Land

The scarcity of land has led to a surge in demand for even the most unconventional parcels. Recent sales demonstrate this trend: a 110 square meter driveway in Newtown sold for $1.25 million, while a similar lot in Balmain fetched $2.08 million [2]. Narrow lots containing electricity substations in suburbs like Lane Cove, Longueville, and Willoughby have similarly sold for between $800,000 and $1.8 million [2].

Listing agents report that interest in these unusual properties often comes from small developers and individuals seeking to build their own homes [2]. The appeal lies in the “blank canvas” opportunity, particularly for those seeking to avoid the complexities of renovating older properties.

Broader Market Trends

The trend of shrinking block sizes is not unique to Sydney, but it is particularly pronounced. KPMG analysis indicates that the share of homes within reach for the average first-home buyer has significantly declined [2]. Approximately one-third of prospective buyers are now priced out of the Sydney market.

Construction price increases, driven by supply chain disruptions following the COVID-19 pandemic (rising 40-50%), have exacerbated the affordability crisis [2]. Developers are increasingly focusing on higher-end properties, leaving fewer options for average-income buyers.

This situation is contributing to an exodus of younger people from Sydney to more affordable regions, such as the Hunter and Wollongong, or even interstate [2].

Looking Ahead

The HIA warns that without a substantial increase in the supply of shovel-ready land and associated infrastructure, demand will continue to be diverted to the established housing market, further driving up prices and worsening the affordability crisis [3]. Addressing this issue will require strategic government planning and investment to ensure a sustainable and equitable housing market for all Sydneysiders.