City fringe land sales bounce back
Low interest rates and developer incentives are driving a turnaround in land sales in Melbourne’s fringe housing estates, but – fortunately for first-time buyers – prices aren’t keeping pace.
Road to recovery: Markets for new residential land are picking up.Credit:Erin Jonasson
Midway through last year, land sales across Melbourne and Geelong’s new greenfield estates were at a three-year low.
Now they have bounced back with two consecutive quarters of growth, RPM Real Estate Group’s latest Residential Market Review shows.
Lot sales jumped 17 per cent in the December quarter. That figure was a rise on the previous September quarter, which itself was sharply up, 48 per cent, on the three months prior.
But the legacy of the downturn, a stockpile of developer lots and transactions abandoned by struggling buyers coming back onto the market, is keeping a lid on prices.
While Melbourne’s median price for established houses is peaking again – it hit $859,000 at the end of last year – land prices have headed in the other direction.
The median lot price fell by 2.1 per cent by the end of the year to $308,900, about 5 per cent less than what families and investors were paying 12 months before.
“The key drivers underpinning a strengthening land market included improved buyer sentiment and activity from interest rate reductions and more borrowing power, ongoing price correction and continued incentives and rebates,” RPM’s chief executive Kevin Brown said.
Sales of new land lots in the growth corridors have traditionally lagged behind established housing as house-and-land developers cater largely to struggling first-time buyers who are sensitive to both prices and job security.
The agency’s head of communities Luke Kelly said developers were still offering buyers incentives and rebates to shift a backlog of stock, a tactic likely to keep prices suppressed for the next six months.
“There are still some secondary lots being sold on the market. Between now and September we’ll see some normality come back in the market,” he predicted, with land sales expected to reach more ‘normal’ levels of about1400 lots a month.
The price of land sweetspot for first time buyers is below $300,000. “That’s what people can afford based on their current incomes,” he said.
Lot sales were strongest in the northern and south-east growth corridor where they rose between 16 and 17 per cent. Out in the west, a high volume of unsold land is impacting prices and sales volumes, RPM reports.
The pick up over the quarter was not reflected in the half-year results of the country’s largest land developer Stockland.
It said last week the slow housing market will hold its full-year earnings at 5 per cent, at the lower end of its guidance estimate.
Stockland’s chief executive Mark Steinert said he expected settlements to pick up in the second half after they had dropped substantially, by one-third to 2096, in the six months to December, down from 3159 a year earlier.
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