Developers restocking dwindling pipelines due to an unprecedented sales boom are fuelling record land rates and driving a closing gap in prices between Melbourne’s metropolitan and regional markets.
The latest figures from RPM Real Estate indicate there were a record 7685 gross lot sales for the June quarter across the city and its fringe regions. This was 2 per cent above the previous quarter’s peak.
According to RPM’s residential market review, a scramble to take advantage of property stimulus before the end of June pulled forward new home demand and upped land prices by 3.1 per cent, their highest growth rate since March 2018.
RPM project marketing managing director Luke Kelly said there were strong fundamentals underpinning an insatiable appetite for home ownership and this was expected to continue over coming months despite headwinds.
"With the median house price sitting at over $1 million, the established housing market is too hot for many right now,” he said.
“Land is undervalued in comparison, and we’re seeing a very good mix of buyer segments responding and areas like Geelong, Mitchell and Moorabool doing very well.”
Lot sales across these areas spiked 10 per cent ahead of the regional first home owner grant halving from July.
RPM estimates the undervalue at $36,500, with the median lot price of $318,500 just 32 per cent of the median house price of $1,010,000. The industry’s accepted ratio is 35 per cent.
Through the June quarter, developers released almost 6500 lots, with the average time on market for lots sold decreasing to two months.
RPM transaction and advisory managing director Christian Ranieri said new benchmark land rates in the englobo space were being achieved as developers looked far and wide in a rush to restock their pipelines.
“Developers who were previously reluctant to go too far are now looking well beyond the traditional Melbourne area and creating a price storm as they explore regional and peri-urban areas like Mount Macedon and the Bellarine Peninsula,” he said.
“Many have pushed through two to three years’ worth of stock in just 12 months and need to replenish their pipeline quickly.”
He cited an acquisition last quarter in Geelong suburb Armstrong Creek —Victoria’s largest growth area—that achieved a rate of about $2 million per hectare on net developable area as one example of a deal that had lifted regional areas on par with Melbourne metropolitan rates.
Oliver Hume’s latest quarterly markets insight report also indicates that land sales in Victoria have remained robust in the June quarter.
“While Victorians have endured extended periods of lockdowns in recent times, their appetite for new residential property is as strong as ever,” it states.
“Regional markets have seen amongst the strongest growth driven by the ongoing shift to working from home, changing consumer preferences and relatively more affordable product.”