Sales Activity Returns to Long Term Levels
Growth areas across Melbourne, Geelong, Ballarat, and Bendigo experienced a significant reduction in new home demand over December 2021, highlighted by gross sales declining 32% to 1,736 lots. This was also the lowest monthly total gross lot sales since August 2020; when Victoria was in the midst of the second lockdown. Consequently, the contraction in sales activity is attributed more so to new home demand moderating from record levels experienced through 2021, rather than the usual drop off in sales activity towards the end of the year with the closure of sales offices.
South East and Geelong Corridor Slip
The greatest falls in gross lot sales occurred across the Geelong (-55%) and South East (-47%) corridors, leading to their respective proportion of total lot sales declining to 7% and 19% respectively. Sales activity in other corridors also struggled. However, by virtue of their contractions being smaller, the concentration of sales in both the Western (41%) and Northern (26%) corridors increased.
The last two cycles within the new home market have both persisted for a comparable time period, with the overall movement in sales being similarly drastic. The downturn between November 2017 and September 2019 saw the growth areas’ twelve month rolling sales figure decline by 60%, before demand rebounded and this figure escalated by 198% through to its peak in October 2021. As the new home market heads into the next cycle, the strength of the economy and purchaser sentiment will be key to the performance of lot sales. In addition, timing and speed of interest rate increases, and the enduring impact of the pandemic on home and work life and subsequent buyer preferences must also be factored.
Pricing Remains at Record Levels
Melbourne’s median lot price edged higher by 0.3% to $355,000 in December, with per sqm lot price growth stronger after the median lot size diminished by 2.8% to 375sqm. Lot absorption was still notably higher than new lot releases despite sales weakening, with subsequent tightening supply and borrowing costs remaining at historical low levels both supporting record lot pricing. Overall, the median lot price in Melbourne has accelerated by 17% in 2021, with corresponding growth in Geelong equally sizeable at 15%.