Five new PSP approvals over Melbourne’s Northern and South
Eastern corridors will provide competitive options to
first home and budget conscious buyers
In March 2017, the Victorian Government announced a plan to rezone 100,000 lots across 17 residential PSPs by the end of calendar 2018. Even though only seven of these PSPs met that deadline, it was announced in January 2019 that five more were approved and waiting to be gazetted.
The PSPs completed earlier in the Western and Northern growth corridors alleviated demand pressures and subsequent price growth. However, this was short lived due to the significant level of pent up demand that was created in the preceding years – particularly through Plumpton and Wollert.
Although current market conditions point to a lack of underlying demand, this is not the case. The market slowdown is largely a result of a tightening in prudential policy. The recent relaxation of restrictions on interest-only lending and a cap on investor loan growth is a step in the right direction and may assist to satisfy the 138,159 person increase in Victoria’s population over the 12 months to June 2018 (of which 98,459 people came from overseas or interstate).
Therefore, the recently announced approvals of Minta Farm and Cardinia Creek South (formerly McPherson) in the South East along with the PSPs of Lancefield Road, Sunbury South and Beveridge Central in the Northern corridor should provide welcome relief for first home buyers and budget conscious buyers.
Additional stock of the most recently approved PSPs
While the approval of new PSPs is a positive for potential buyers, not all land within the PSP is immediately developable. Developer-held land can be brought to market as a subdivision land estate immediately as opposed to privately owned land, whereby the owner may have no intention of selling to a developer or develop it themselves. Hence, it’s important to look beneath the headline number of what each PSP can cater for. When the 5 recently approved PSPs are combined at current yields, a total of 34,920 lots are achieved. However, of this amount, 20,417 lots or 42% of all potential lots are currently held by developers*.
The PSPs of Lancefield and Cardinia Creek South have over two-thirds of all lots currently being by developers – the best of the 5 PSPs. This is critically important for the land-starved South East, with the Casey corridor recording a median of $360,000 in December quarter 2018.
Similarly, Hume and Whittlesea corridors have seen robust price growth over the past 18 months. As a result, first home buyers require alternatives such as Sunbury’s newly approved PSPs. With an estimated 18,300 developer held lots, significant supply to buyers in the Northern corridor will become available through these PSPs. This should take the pressure off estates along Donnybrook Road and the more established areas of Craigieburn and Greenvale.
Despite the current downturn, having available supply to match demand when the market recovers is vital. The current situation plays out well for first home buyers. With the land price overall pausing during the December quarter (up a marginal 1%), along with significant land coming online in the first half of calendar 2019, first home buyers should be in a more favourable position in terms of price and choice that they haven’t been in for some years.
*The determination of whether or not a parcel of land is developer held or privately owned is determined by ongoing title searches. RPM’s best efforts are made to be accurate with the classification, however at times when a title is run the parcel of land could be going through an off-market sale.