Melbourne Land Pipeline Faces Capacity Crunch Despite Rebound

Melbourne’s greenfield land market faces a capacity crisis as forecasts for production capability across growth corridors predict declines up to 40 per cent during the next two years. All this just as demand is expected to surge, says Research4 director Colin Keane. Keane’s research shows that Melbourne’s south-east corridor’s current capacity of 342 lots per month—around 85 per cent of underlying demand—will fall to 286 lots per month by 2027, meeting just 71 per cent of demand. The decline stems from 27 per cent of current estates reaching completion with inadequate replacement projects in the pipeline. “The existing capacity of the market is going to fall away over the next two years,” Keane says. “The replacement of ending estates with new estates is not keeping up with what is needed, and newer land estates are already 75 per cent smaller.” Approved precinct structure plans in the south-east can only deliver replacement estates for another five years, which will create a medium-term supply constraint, Keane says. And without new PSPs approved and progressing through the planning system, the south-east corridor will struggle to maintain production levels beyond 2029, constraining the market’s ability to meet demand in what is traditionally Melbourne’s highest-volume greenfield area. The northern growth corridor faces similar pressure, with capacity projected to drop from current levels that meet demand to 322 lots per month by 2027. ▲ B&amp;S Land managing director Frank Nagle and Research4 director Colin Keane. Major acquisitions signal confidence While approved land can deliver replacements for nine years in the north, Keane says the pipeline is weakening. Western corridor capacity will fall from 127 per cent of demand to 268 lots per month, while the south-west Wyndham market will decline from current levels to 237 lots per month. Geelong’s production capability will drop from 246 to 157 lots per month over two years. “We’re getting a weakening in production capacity while at the same time over the next two years we will have a notable strengthening in land sales,” Keane says. The capacity warnings come as Melbourne recorded 954 lot sales in September, an eight per cent quarterly increase and 18 per cent year-on-year growth. The result places Melbourne third nationally behind South-East Queensland and Western Australia, though Melbourne led the country in the June quarter. B&amp;S Land managing director Frank Nagle says Victoria had a “much better year” with significant transactions at the year’s end. Acquisitions across the north of Melbourne, including large purchases at Craigieburn and Wollert, were the state’s largest transactions. Resimax Group was one of the most active buyers. By October 2024, it had acquired more than 700ha across metropolitan Melbourne in deals valued at $8 billion. The acquisitions included 274ha at Beveridge and 115ha at Wallan, as well as sites at Sunbury, Rockbank and Melton. Combined with its existing portfolio including the Eynesbury project, managing director Aziz ‘Ozzie’ Kheir says the group is positioned to deliver more than 22,000 lots with an estimated house and land value exceeding $17 billion over the next five years. ▲ Resimax Group founder Ozzie Kheir is doing his bit to get Aussies in homes. Ready-to-build sites in demand Nagle says the ability to service and produce land has become the paramount consideration for buyers entering the market. “People won’t buy it if it’s got any planning issues, they won’t buy if it’s got servicing issues,” he says. “Cost issues are being dealt with in the fullness of a project and the retail revenues coming out of it.” Victoria is now attracting countercyclical buying interest, though it still “sits now below South Australia, Queensland and New South Wales” in buyer discussions. Research4 data shows Melbourne is operating at just 64 per cent of its sustainable production capacity of 1500 lots per month, contrasting sharply with South-East Queensland at 108 per cent utilisation and Western Australia at 167 per cent. Keane says Melbourne’s 954 sales per month “feels like 650” because the market is operating at a diminished capacity while other states are at capacity. This “idle production” dampens the sense of urgency and competition that typically drives stronger market sentiment, he says. Seven of Melbourne’s 10 sub-markets recorded volume increases in September, up from four in June. The broadening recovery marks a shift from previous quarters when growth was concentrated in one or two corridors. The south-east and northern markets showed particularly strong confidence levels, with cancellation rates well below the Melbourne average. Cancellation rates improved to 17 per cent, approaching the 15 per cent level that Keane says signals strong buyer confidence. ▲ Resimax Group recently acquired more than 700ha of land across Metropolitan Melbourne in deals valued at $8 billion. Stock levels have fallen to 2500 lots on registered price lists. At current sales rates, this inventory would be exhausted in under two months. The current ratio of three blocks on price lists for every sale sits well above the one-to-one ratio that typically triggers price growth. Keane estimates Melbourne is nine to 12 months away from that threshold and the resulting stronger price movement. Melbourne’s median land price remains at $404,000, around 49 per cent of the Australian Bureau of Statistics median house price. Research4’s fair value analysis suggests land should sit at 45 per cent or around $370,000—a disconnect that marks the first time land prices have failed to correct during a housing downturn. Products priced near the $370,000 fair value are selling strongly, driving a shift in market composition. Twenty-one per cent of September quarter sales were under 250sq m, compared with eight to nine per cent in Sydney. Products under 300sq m are priced at $347,000 or lower. Casey is approaching $500,000 median price and will likely become Melbourne’s first half-million-dollar land market in 2026. Greenfields numbers around the nation Sydney’s median reached $690,000, adding $200,000 in one year compared with eight years for earlier increases. National land sales reached 4106 lots in September, a 26 per cent monthly increase exceeding the long-running average of 3500 lots. “Queensland has clearly been the standout,” Nagle says. It “dominated” land transactions during the year, with Moreton Bay and the Sunshine Coast corridor leading activity. ▲ Approximately 150 residential lots were sold before Stockland picked up the 4500-lot Kings Forest site. At $620 million, Stockland’s acquisition of Bob El’s Kings Forest site near Kingscliff in northern New South Wales was the single biggest transaction of the year, Nagle says. Avid Property Group paid $114-plus million to Stockland for around 100ha south-west of Wollongong, which it has subsequently rebranded as ‘Forest Reach’. The site is expected to deliver almost 900 homes in various typologies. Nagle says South Australia is attracting attention from buyers including Cedar Woods and MAB Corporation seeking countercyclical opportunities. “If you want to follow the money, I’d be looking at South Australia,” he said, pointing out how these larger players and others have found value and opportunity in the state. Cautious optimism for Victoria Keane forecasts Melbourne land sales will exceed 1000 lots and push towards 1200 per month through 2026, with mid-year marking the point when capacity constraints drive value increases and pricing power returns. While Nagle says green shoots are emerging in Victoria, he cautions the recovery is progressing slowly and doesn’t warrant premature optimism. “Don’t rush to the garden shed to get the lawnmower out quite yet,” he says.

Melbourne Land Pipeline Faces Capacity Crunch Despite Rebound

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