So what’s news in Melbourne’s property market at the moment?
The HIA state that new dwelling starts are up more than 26 percent compared with last year, and although they expect it to decline next financial year, the strong pipeline of approved projects in Victoria should see activity remain strong. This makes sense considering how well the growth area land market has performed in 2015.
The commonwealth bank and JP Morgan concur with this view, and went on to say that it should keep a lid on prices due to the first dip in capital city home prices in six months. With dwelling approvals running counter to this potential trend then a slow down in building activity has some merit.
However what is interesting to note is the information from growth area land sales recently presented by NSLP. The record sales volumes recorded in the September quarter are expected to continue to underpin high levels of housing activity in 2016 as suggested by others, but the current average lot price of $211k is still below the last peak of 2009, and still well within reach of the first home buyer. What this suggests – which is somewhat contrary to other commentary – is that these ‘greenfield’ areas still have room for price growth in a number of corridors. The limiting factor on future building activity in growth areas appears to be more due to supply and production issues than anything else.
So is supply not meeting demand? If not, what could be causing this?
There are differing views on what Melbournian’s needs are today and into the future, and how we should cater for that. Some suggest that increasing density with non-detached housing in established suburbs and limiting urban sprawl is growing in popularity and should be priority due to shrinking family sizes, more households without children, and increased desire for better amenities.
Others have challenged this view, suggesting there may be a serious mismatch between the projected increase in childless households demanding more high density apartments. It is argued that many empty nesters are likely to continue to prefer to occupy their existing family home, and the demand for detached housing will continued to be demanded by growing families.
Monash University’s Population and Urban Research department says the planning system needs to take into account the types and age of families to not only avoid an over-supply of apartments, but a serious shortage and therefore affordability of family homes.
Melbourne’s planning system is currently undergoing a review process, and it appears to present some of the same potential risks and opportunities outlined above. Our post titled… ‘Plan Melbourne Refresh – What Does This Mean For The Australian Dream?’ goes into this in a bit more detail.