Land sales frenzy as supply dries up

LAND sales surged in the Geelong region for the June quarter as buyers scrambled to take advantage of changes to the Regional First Home Owner Grant halving from July, driving gross lot sales in the area up by seven per cent, according to RPM Real Estate Group.

Activity was most active around the Armstrong Creek growth area, which accounted for 64 per cent of new supply and 60 per cent of gross lot sales.

The median land value also increased by 17 per cent in Geelong, nine per cent in Bellarine and six per cent in Lara. With 70 per cent of buyers being owner occupiers and just over half first homebuyers.

RPM’s second quarter Residential Market Review for 2021 suggests stimulus that concluded at the end of June pulled forward new home demand and upped land prices to their highest since March 2018.

RPM predicts sales volumes will gradually decline as less stock is brought to market, prices rise, and buyers delay purchase due to concerns over lockdowns, a slow vaccine rollout and job security.

Meanwhile, price leaps in the established housing market in recent quarters continued to make land an affordable proposition, with indicators suggesting it is still undervalued.

RPM estimates this undervalue could sit at $36,500, with the median lot price of $318,500 just 32 per cent of the median house price of $1,010,000.

RPM managing director project marketing Luke Kelly said there were strong fundamentals underpinning an “insatiable” appetite for home ownership and this was expected to persist over the 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,” Mr Kelly 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.”

“Demand is currently outstripping supply, which is simply unsustainable.”“We will see the market start to moderate, with developers releasing less stock, prices continuing to rise and some segments of the market delaying purchase due to concerns over persistent Delta lockdowns, the slow vaccine rollout and job security.”

Record number of lots sold as prices continue to increase across Melbourne and fringe regions with 7,685 gross lot sales recorded in June quarter 2021, two per cent above the previous quarter’s peak.

With Melbourne growth corridors mostly contracted, 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, according to RPM.

“Many have pushed through two to three years’ worth of stock in just 12 months and need to replenish their pipeline quickly,” Mr Kelly said.

“We have noted an acquisition in Armstrong Creek last quarter that achieved a rate of approximately $2 million per hectare on net developable area as one example of a never-before-seen result bringing regional areas on par with Melbourne metropolitan rates.

“The biggest risk is the proposed windfall profits tax, which will penalise developers by up to 50 per cent of any gains achieved through rezoning.

“This could really batter the land sector, making it daunting for developers and investors and causing a retail price frenzy as stock becomes scarce.”