Melbourne and Geelong growth areas recorded another remarkable month, achieving 2,659 gross lot sales in July – the highest level in four months and 57% more than in July 2020.
Robust sales activity and purchaser sentiment has been underpinned by a number of demand factors, including the ongoing rebound in the economy and employment conditions, historical low interest rates, the pandemic induced structural change in purchaser preferences towards larger homes, and an improving relative affordability advantage of new homes compared to established dwellings. These have all fuelled sales despite the end or reduction in incentives including Homebuilder, the 25% stamp duty discount for vacant lot purchasers, the halving of the Regional First Home Owners Grant, along with lockdown 5.0 towards the back-end of the month.
Lot sales were evenly spread across the growth corridors, with the exception of some regional areas – Greater Geelong, Mitchell, and Moorabool. These regions peaked in June (and were all eligible for the higher $20,000 Regional First Home Owner Grant), before unsurprisingly easing back as the grant halved from July. Melton recorded the largest improvement over the month with its proportion of lot sales increasing from 22% in June to 26% in July, taking mostly from Geelong which fell from 15% to just 9%. It is important to note that this is primarily due to supply constraints, rather than demand as stock levels have remained at historical lows.
Taking a closer look at supply, just 3,380 lots remain on the market as of the end of July; this is down significantly from the same time last year which recorded 5,839 lots on the market. This depleting level of stock has created price pressures with July recording a 2%, or $5,783 increase in the median lot price to $321,300. The median lot size also dropped from 392sqm last month to sit at 388sqm in July. Consequently, the median per square metre price of land has risen 2.9% over the month.
While easing from its peak in 2020, the demand factors at play have continued to produce solid enquiry levels in August, particularly from first home buyers and upgraders, and even through lockdown 6.0. This should provide the market with confidence that the current lockdown should have a minimal market impact, in line with how it responded to lockdown 5.0.