‘Recovery fragile’ but land sales show first green shoots
The property market is showing the green shoots of recovery, with the first increase in the number of lots sold for new housing in almost two years.
Land sales on greenfields estates across Melbourne and Geelong rose 13 per cent in the second quarter, ending a run of six straight quarterly declines, a report from RPM Research Data and Insights shows. The median lot price also jumped 1.3 per cent to a record of $385,000.
Melbourne’s median lot price rose by 1.3 per cent to a record of $385,000 in the second quarter.Credit: Fiona-Lee Quimby
The growth comes despite headwinds from higher interest rates and a rising cost of living, and may be an indication that the worst of the property downturn is over. However, RPM’s latest Greenfield Market Report says the number of sales is coming off a low base, with 1853 lots released to the market – the lowest in four years – and the average days on the market blowing out to more than 100.
As such, “the recovery remains fragile, with market headwinds remaining a threat that could halt momentum in the short term,” the report says.
Luke Kelly, RPM’s national managing director project marketing, says while the signs are encouraging, it is too early to speak of a full recovery.
“However, there is light at the end of the tunnel with the RBA’s recent decision to leave the cash rate on hold at 4.1 per cent for a second consecutive month, which indicates a more cautious approach to future rate rises,” he says. “This gives borrowers some certainty around their borrowing capacity.”
More than 2146 housing lots were sold in the second quarter as more rebates and incentives fuelled demand. However, sales are still 53 per cent lower year-on-year, with potential purchasers impacted by borrowing capacity restraints as rising rates bite and inflationary pressures grow. The consumer price index, which measures inflation, rose 6.1 per cent in the year ended June 30.
The Melbourne northern growth corridor’s affordability relative to western and south-east areas had a jump in lot sales to their highest proportion of all corridors in a decade, at 35 per cent. Two new communities were added in Hume and Whittlesea, but despite this, lot sales outpaced new supply. Owner-occupiers made up 73 per cent of buyers, and just over half were first home buyers.
The south-east corridor remains the most expensive area, with median lot size prices rising 3.5 per cent to $440,000. Sales lifted 31 per cent during the quarter to 451 lots, with Casey making up most of the total.
The Geelong corridor fared worst, with sales slumping 26 per cent to 134 lots and new supply shrinking 48 per cent to 147 lots. Both figures are decade-lows.
Mr Kelly says developers offering rebates and incentives are driving sales. “This activity created urgency in the marketplace, with incentives between 5 and 10 per cent stimulating buyer activity from second and third home buyers, bringing forward purchasing decisions,” he says.
Incentives are likely to remain in the second half of the year and may fuel further pent-up demand from strong population growth and elevated immigration for the 1500 titled lots due to hit the market between now and the end of 2023, he says.
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