- Melbourne land sales rose by 13% in Q2.
- Median lot price rose by 1.3% to $385,000.
- A record low number of lots came to market in Q2.
The Melbourne real estate market has recorded increased land sales for the first time in one-and-a-half years, according to the latest Greenfield Market Report by RPM.
Lot sales grew by 13% across Melbourne and Geelong growth areas, clocking in 2,146 lots sold during the June quarter. The report noted this rise ends the run of six straight quarterly declines.
The uptick follows the April school holidays and two interest rate pauses.
Encouraging signs, but too soon for talk of recovery
While this may appear to be the green shoots of recovery for the Melbourne property market, there are still headwinds hindering a full-blown recovery.
Sales were still well below last year’s figures. The report found lot sales were 53% lower year-on-year.
Prices for Melbourne homes are not expected to lift by much either, with recent PropTrack data forecasting between -1% to 2% change in prices by December this year.
New supply coming onto the Melbourne market is also low. The report found only 1,853 new lots hit the market, the lowest level in four years.
Buyers continue to battle against the rising cost of living and challenges with borrowing.
Light at the end of the tunnel
Interest rates have been on hold for the past two months, with RPM managing director of project marketing, Luke Kelly, noting that the move indicates a more cautious approach to future rate rises.
“This gives borrowers some certainty around their borrowing capacity moving forward, although we are likely to see one more interest rate increase before the end of the year.
“Annual CPI inflation came down to 6% for the June quarter showing a move in the right direction from the RBA’s perspective,” added Kelly.
He added that data indicates construction prices are stabilising, which is good news for land buyers looking to build.
Again, while the cost of materials begins to fall, the reductions are not consistent across the board. Steel and timber prices recorded warmly welcomed falls in price, however concrete, cement, and sand products remain elevated. Building cost are also largely driven by labour shortages.
Incentivising buyers, and new supply
Kelly said several developers have come to the party, offering significant rebates and incentives to drive lot sales across communities in Melbourne and Geelong.
“This activity created urgency in the marketplace with incentives between 5% and 10% stimulating buyer activity from second and third home buyers and bringing forward their purchasing decisions during the quarter,” he said.
“We believe incentives are likely to remain in place during the second half of the year due to the affordability challenge for many buyers and the elevated level of resale blocks coming back on the market, typically at competitive prices compared to the available stock.”
Luke Kelly, RPM
“There is also the possibility that these rebates and incentives will fuel underlying pent-up demand from strong population growth in Victoria and elevated immigration,” added Kelly.
Some 1,500 titled lost are expected to hit the market between now and the end of the year, according to Kelly.
“There will be additional stock coming online between August and December so, combined with the incentives, it makes an attractive proposition for buyers with developers eager to shift the stock.”
Developers are also paying record rates for premium development sites, especially those with a Precinct Structure Plan (PSP) in place, according to RPM national director and head of transactions and advisory, Ed Wright.
“We’ve recently secured sites sales in South Morang and Cranbourne East to active local developers showing that there is strong activity from forward-thinking buyers who know that if there are 16,800 lots sold in a given year, then there will need to be commercial infrastructure to service those new residents,” he said.
