New house demand reached a new monthly high for 2020 in November, with gross sales across Melbourne and Geelong growth areas escalating by 13% to 2,334 lots. More significantly, this level of sales activity is commensurate with the monthly totals seen during the previous peak in the new house market upturn through 2017.
Further easing of social distancing requirements as Victoria reached zero COVID-19 cases and the subsequent improvement in economic and employment conditions through November has underpinned the release of pent–up demand through the second lockdown onto the market. This has been exacerbated by the $25,000 HomeBuilder grant, which has encouraged future new house demand to be brought forward into 2020.
As a result, gross sales totals for Melton of 555 lots and Casey of 404 lots in November were both their second highest monthly figure respectively since the start of 2012. Moreover, all major growth areas are experiencing rising sales activity, with the exception of Wyndham, which has struggled for momentum through 2020. This is despite Wyndham containing the greatest volume of titled lots.
In November, it is estimated that lots eligible for the HomeBuilder Grant constituted approximately 50% of gross sales (down from 57% last month). This demonstrates the emergence of increasing confidence among purchasers to enter the new home market without the assistance of the grant as Victoria’s economy recovers.
However, strong new house demand is not having its normal inflationary impact on lot prices, with Melbourne’s median lot price decreasing by 1% to $303,000. With the median lot size remaining static at 392sqm, the percentage fall in the per sqm lot price was slightly greater.
Additional stimulus was provided to the new house market in late November with the Federal Government announcing the extension of HomeBuilder to the end of March 2021, albeit reducing to a still attractive $15,000 during this three month extension. This was followed by the State Government’s initiative to cut stamp duty by 25% for all vacant residential lot purchases through to the end of June 2021. This should ensure that new house demand remains relatively buoyant through the first half of 2021, and support sales activity.