The demand for housing lots in Melbourne’s outer suburbs and greenfield markets is now exceeding local development capacity.
Driving the withdrawal from high-density CBD locations has been government stimulus for new housing, low interest rates and changing housing preferences due to Covid-19, prompting mum-and-dad investors and first-home buyers to look further afield.
According to recent data from the Urban Development Institute of Australia (UDIA), more than 53,000 greenfield housing lots were sold during 2020, almost double those of 2019.
Sales in the second half, after the launch of HomeBuilder, were the highest since 2009.
Nowhere has the demand for greenfield land been more evident in the past six months than in Geelong, where new land sale volumes for the last quarter increased by 51 per cent, to 307 new lots per month.
According to greenfield market expert Research4, preliminary sale volume numbers for the first two months of the year indicate that the average net monthly sale rate is now almost doubling capacity.
“Current capacity is capable of addressing 270 lot sales per month while current activity is now exceeding 410 lots per month,” Research4 director Colin Keane said.
“The current number of active estates is insufficient to effectively address current levels of demand and this will place upward pressure on land prices during the coming year and beyond.
“If this cannot be managed, then the effectiveness of the local greenfield market in addressing housing demand will be significantly diminished.”
The median lot price in Geelong is currently $85,000 cheaper than in central Melbourne and $20,000 cheaper than other greenfield locations around the city.
“It is expected that Geelong will need to bring on 32 new estates of average scale within six months to effectively respond to 300 sales per month,” Keane said.
“And to respond to 400 sales per month, the market will need to bring on 52 new estates over the coming six months.”
Keane said that based on current levels of consumption, it was expected that a further 18 active estates would be completed within the next six months.
“If the Geelong market cannot effectively replace these ending estates over 2021, then the current level of record high demand will directly affect land prices,” he said.
UDIA national president Simon Basheer said the greenfield development sector had spilled into “full capacity” in the second half of 2020 and early 2021 as apartment completions faltered.
According to the UDIA, unit completions slumped 16 per cent last year to 61,000, the third year of decline in a row.
Housing Industry Association chief economist Tim Reardon predicts that the boom in detached home building, which underpinned the surge of greenfield sales, will taper.