Melbourne Property Market – Residential Land Sales Volumes Pointing at Price Correction
Melbourne Growth Area Land Market: September 2018 Quarter
At the end of March 2018, the average lot price in Melbourne’s growth area land market was at $323,000 and the volume of sales were continuing to drop off from the previous quarter at just under 5000 lots, or 1650 odd lots per month.
The recent September 2018 data from UDIA Victoria and key industry research partners has revealed that the price growth has now flattened out, with median lot price slightly lower at $320,500 at the end of September 2018, although it is still more than 11% higher than this time last year. It’s the first fall since Jun 2015.
Median lot sizes in Melbourne’s growth area property market have not changed compared with 6 months ago at around 400m2, down from about 415m2 at same time last year.
The rate of price growth for land appears to now be following established areas, with houses and unit prices staying pretty flat. Demand appears to now have well and truly softened, as we anticipated. A combination of continued credit tightening and higher than average price growth over the last year or so, with wage growth lagging, has unfortunately seen a shift in the supply demand balance.
Land sales volumes have continued to drop off from their record levels 12 months ago, recorded at just under 3600 lot sales for the quarter. That’s a further 15% less than last quarter, and 40% less than 12 months ago.
Pre-sale to settlement timeframes are still quite high as production rates are still stretching construction resources from previous pre-sales, but the slowing sales rates might help tighten that up over the next 12 months. As mentioned previously, we also feel that the rate of price growth may have pushed a little too far, so is likely to correct a little in the short term to stabilise volumes. We suspect it will be a ‘buyers’ market for a little while.
Below is the most recent graph from RPM’s research division which provides a snapshot of the land sales volume and housing estate changes over the last couple of years.
Update on VPA’s Commitment to New Land Supply
In late August 2017, the Victorian Planning Authority announced a commitment to re-zone approximately 100,000 lots via 17 Precinct Structure Plans by the end of 2018.
Including Wollert (15,000 dwellings) that was gazetted in February 2017, we have seen the following PSP’s gazetted to date:
Mt Atkinson & Tarneit Plains – September 2017 (6,700 dwellings)
Donnybrook & Woodstock – November 2017 (16,400 dwellings)
Plumpton and Kororoit – February 2018 (20,000 dwellings)
So that’s about 58000 lots re-zoned since February 2017, and 43000 since the announcement. Plumpton and Kororoit can now be counted in as their interim Infrastructure Contributions Plans are now completed.
A further 8 PSP’s totalling about 45,000 future lots have since been submitted for approval, but only 3 have very recently been approved by the Minister (being Macpherson/Cardinia Ck Sth – 10,000 lots, Minta Farm – 3,000 lots, and Beveridge Central – 3,600 lots). But these 16,600 odd lots may not be gazetted till early 2019, and with ICP’s still outstanding, it could be mid 2019 before these lots can be ‘permitted’. Technically this leaves government still well short of their target, only achieving 58% of their planned 100,000 lot target at best. It may more likely be mid to end 2019. Time will tell.
