Melbourne land market peaks as
affordability concerns kick in
RPM’s Residential Market Review for the June quarter 2018 has been released. Data from the report shows sales volumes and price growth are continuing to ease as rising affordability concerns permeate through the Greater Melbourne and Geelong vacant land market.
The last quarter witnessed a reversal in the trend of gross lot sales outpacing new lot releases, with sales volumes falling 30 per cent to 4,264 lots compared to the June quarter last year.
The increase in unsold lots has impacted prices, with the median lot price marginally increasing 0.6% to $325,000 – the lowest quarterly growth rate in three years. Annual median lot price growth rate has slowed to 19 per cent.
RPM head of Communities Luke Kelly said the continuing price correction in the greenfield market reflects a shift in buyer demand to more affordable locations and smaller housing stock.
“While demand remains above supply due to the strength in population growth, it seems we have reached a peak in the market,” he said. “Purchaser demand is softening in response to deteriorating affordability, except in areas such as Melton, Moorabool and the Bellarine Peninsula.
“The market is settling to more sustainable levels of around 16,000 – 18,000 lots annually,” he said. “If supply continues to outpace sales it will likely lead to further slowing price growth.”
The report also reveals a pronounced ‘flight to quality’ by developers and a grading of development sites in both the greenfield and infill markets. Developers are seeking opportunities in peri-urban areas to meet demand from first home buyers pushed out of established growth corridors.
The report also notes a new breed of purchaser in the market: speculative investors, who are driving more activity in the nomination space and looking to on-sell their sites to realise immediate uplift as the market softens.
Following a prolonged upturn the apartment and townhouse market has cooled. With investors retreating, owner occupiers have emerged as a prominent force, particularly in the middle ring.
The decline in apartment approvals has moderated while townhouse approvals have trended upwards. On a rolling 12 month period to June quarter 2018, new housing approvals (apartments and townhouses) is up 23 per cent from a year earlier.
The prominence of owner occupiers – including downsizers – has resulted in lower volume, higher priced projects being developed in blue chip suburbs featuring high quality design, space, security and amenity.
A copy of the report covering the greenfield market, development sites, apartments and townhouses and international investors is available through the link above.