Robust new house demand did not abate after the HomeBuilder Grant lowered to $15,000 at the start of 2021, with Melbourne and Geelong growth areas recording a long-term high of 1,906 gross lot sales January. This level of sales activity was more than double the corresponding value in the first month of 2020.
Looking at proportion of sales by LGA, Melton reached an all-time high of 28% with 528 gross lot sales. While only 16 lots more than last month, Melton still outperformed other large growth areas such as Casey, Wyndham, Hume and Geelong which saw slight decreases.
While still significant, fewer purchasers are relying on the HomeBuilder Grant, with an estimated 56% of lots sold in January not eligible for the incentive. This highlights the strengthening in purchaser confidence, underpinned by the ongoing recovery in economic and employment conditions, and historically low housing borrowing rates. In particular, fixed interest rates were cut deeper than variable interest rates after the last cash rate reduction in November, providing purchasers with certainty of lower interest repayments over the next few years.
Improving sentiment and relatively cheap housing finance is starting to have an inflationary effect on prices, with the median lot price experiencing its highest monthly increase since mid-2019 in January of 2.1% to $310,000. Further accentuating this price escalation was that HomeBuilder reduced by $10,000 at the start of the month, emphasising the negligible impact the scheme has had on lot prices. Additionally, the per sqm lot price witnessed commensurate growth after the median lot size only edged larger to 392sqm.
Momentum in new house demand had continued into February. However, it remains to be seen whether the 5-day snap lockdown will have any longer lasting impacts on confidence, as purchasers are reminded of the ongoing volatile environment the COVID–19 pandemic presents.