Despite continuing subdued sales over the quarter,
the easing of APRA’s lending restrictions will boost
buyer sentiment and lot sales activity.

RPM’s Residential Market Review for the March quarter 2019 has been released.

An easing of lending restrictions imposed by APRA will boost first home buyer sentiment and drive demand in Melbourne’s land market despite continued subdued sales rates during the March quarter, RPM’s Residential Market Review reveals.

RPM’s head of Communities Luke Kelly said APRA’s plan to remove the 7 per cent loan serviceability buffer combined with a likely RBA rate cut, the Coalition’s surprise election victory and promised First Home Buyer Deposit Scheme will improve buyer confidence and increase lot sales activity.

“These green shoots that are emerging provide a positive outlook for the land market in terms of residential borrowing and sales volumes,” he said. “These measures should increase market confidence, stability and certainty to bring back buyers.”

For the March quarter, RPM’s report shows lot sales across Melbourne’s growth corridors declined 18.6% to 1,650 lots from the previous quarter and 59.5% from the same period a year ago when the market peaked.

While the median land price remained steady at $325,000, value add incentives developers are offering to drive sales are not reflected in the headline figure, according to Mr Kelly.

“We believe prices will reduce further over the next couple of months prior to stabilising later in 2019, allowing the land market to recalibrate after record growth in recent years.

“Population growth combined with moderate sales in both the new housing and established markets along with acute vacancy rates point to a growing level of underlying demand that should convert to real demand.

“The development industry needs to ensure there is appropriate supply in the pipeline to avoid heightened affordability concerns that characterised the property market in recent years,” he said.

Macro prudential measures and impositions on investors continue to underscore slowing demand in the apartment and townhouse market, which is impacting the speed of pre-sales, resulting in projects being delayed or shelved.

In addition, the apartment market has been working through a considerable level of supply and in some suburbs an oversupply. New stock coming to market also – which is all taking longer to move – has consequently impacted on the pipeline of activity.

Over the March quarter other dwelling approvals (apartments and townhouses) declined 11.8 per cent to 5,246 approvals from the previous quarter and 41 per cent compared to the same quarter 12 months ago.

A copy of the report covering the greenfield market, development sites, apartments and townhouses and international investors is available via the link above.