Buyers see value in land market
as prices moderate

RPM Real Estate Group’s Q4 Residential Market Review reveals escalating sales volumes and moderating real prices underpinned a continuing steady and sustainable rebound in Melbourne’s land market.

RPM’s latest report shows total lot sales across Melbourne’s and Geelong’s land market increased 17 per cent to 3,185 for the December quarter from the previous quarter and 34 per cent from the same period last year.

In addition, November recorded the eighth straight month of sales growth while December, typically a slower month, outperformed the monthly average.

RPM’s head of Communities Luke Kelly said: “Buyers are seeing value in the land market given they can negotiate a well-priced larger lot, with developers keen to move returned titled stock and unsold lots.

The report reveals Greater Melbourne’s median lot price continued to moderate, falling 2.1% to $308,900 from the previous quarter and 5% from the same period a year ago.

Mr Kelly said the price correction is partly attributed to a still reasonable volume of discounted titled stock returning to market as well as overhang stock, which has started to slow.

“In addition, rising values in the established market and moderating prices in the land market has reduced the land-price-to-house price ratio, meaning buyers are seeing more value in a block of land or a house and land package rather than an existing house.”

In the development site market, the quarter marked a pronounced turnaround resulting from pent up demand from developers and landowners who held back their properties for most of 2019 until they saw more stable market conditions where their values could again be supported.

Stockland’s acquisition of a large-scale site in Donnybrook Rd for over $100 million signified a big deal by a big player, and gave other local developers confidence to invest, resulting in deal flows in the back half of the year of more than $350 million.

In the inner and mid-ring apartment and townhouse market, Mr Kelly said tentative positive approval numbers provide cautious optimism.

“That said, the mismatch between supply and demand in this sector is still a key challenge,” he said. “New project activity going through the pipeline is vital given once supply is absorbed there will need to be readily available stock to meet demand, otherwise a shortage will occur, putting pressure on vacancy rates, rents and prices overall.

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