Land Crunch Sharpening Appetite for Townhouses

Melbourne’s growth corridor developers are scrambling to find more greenfield opportunities as record-breaking sales and a long-term demographic shift to the regions plays out.

Melbourne and its fringe regions recorded a record 7835 lot sales in the September quarter of 2021—2.5 per cent higher than the previous quarter’s peak.

The median lot price is now $326,000, a new high, despite the median lot size reducing 2.3 per cent to 383sq m, according to RPM data for the September quarter.

RPM managing director of project marketing Luke Kelly said catering for working from home, and affordability constraints would reshape masterplanned communities of the future as developers adapted to the ongoing demand in Melbourne’s growth regions.

“With prices for house and land in Melbourne’s growth corridors increasingly out of reach for many first home buyers amid housing affordability concerns, there is a growing demand for medium-density options including townhomes in greenfield estates,” Kelly said.

“With longer-term work-from-home arrangements, buyers can now look further out, unbound by office locations, making townhomes more attractive to buyers.

“Developers are increasingly aware of this and over the next 12 months, we anticipate seeing strong demand for townhomes and a lift in supply as developers incorporate these products into their masterplans.”

Kelly said RPM was expecting a higher ratio of townhouses within masterplanned communities into the future, following a recent increase from 5 per cent to 12 per cent.

Total gross lot sales: September 2021

_{^Source: RPM Quarterly Report}

Buyer resilience through progressive lockdowns has remained strong, and Kelly said he anticipated moderate growth into 2022.

RPM managing director of transaction and advisory Christian Ranieri said the topping out of the englobo land sector was “unlikely to materialise”.

“The velocity of the greenfield market is extraordinary … we are seeing price growth in the space of a single campaign,” Ranieri said.

“The main challenge to this is the Windfall Gains Tax, which may contribute to a number of developer, investor and vendor decisions moving forward and pull regional prices down.

“However, as we’ve seen throughout the pandemic, agile developers who continuously innovate to meet demand and make smart decisions could well cushion the tax’s financial blow.”

The Windfall Gains Tax successfully passed through the Legislative Council last week, which now means any uplift of value as a result of rezoning above $500,000 will be taxed at 50 per cent.

Victoria’s planning minister Richard Wynne said it was fair that developers making large windfall profits returned a “reasonable proportion” to the community.

“This change won’t affect residential homes—just those who receive massive windfall gains from re-zoning decisions,” Wynne said.

Data from the Victorian State Revenue Office’s Annual Review 2020-2021 showed first home owner grants had increased 30 per cent on the previous year.

The Victorian government provided $274 million in first home buyers grants last financial year, more than double the amount four years ago.

Top suburbs for the number of first home owner grants last financial year were high growth corridors in greater Melbourne including Craigieburn, Mickleham, Hoppers Crossing, Tarneit, Clyde and Cardinia.

About $885 million in stamp duty concessions were also recorded across 53,980 property transactions in the past financial year.

Treasurer Tim Pallas said the financial incentives had helped households and businesses “weather the storm during the pandemic”.

“The pandemic has underscored the value of a secure, safe home to call your own, which is why we’re helping more Victorians get into the property market,” Pallas said.

Melbourne’s western growth corridor including Melton, Wyndham and Bacchus Marsh continues to lure the most significant number of new homebuyers. It recorded 3332 lot sales in the September quarter, compared to the northern growth corridor’s 1932 lot sales, and the south-east’s 1677 sales.