Bendigo still offers more value than the city

Numerous economists have predicted a subdued selling season this year due to speculation of rising borrowing costs and affordability as property prices become out of reach for many.

Affordability continues to be a concern as greenfield land prices have increased by 15 per cent over the last 12 months to January and now sit at $375,900 and according to Real Estate Institute of Victoria the metropolitan Melbourne median house price for the December 2021 quarter was $1.12 million.

Increases in the cost of building is also another contributor to the affordability challenge, in accordance with ABS data from April 2020, the average cost of building in Victoria is $327,000.

Red23, specialist sales and marketing partners for land developments across Victoria advise that this cost will only increase due to rising cost of materials and delays in materials arriving, therefore, if this price was applied to the median land price, the median cost of a new home in Metro Melbourne is $702,900.

Red23 managing director Terry Portelli said that in January, they witnessed the median land price increase in all Melbourne Greenfield municipalities while in Greater Geelong, we saw a decrease of 12 per cent due to land size decreasing by 22 per cent and lack of stock availability.

“Currently 27.3 per cent of land is under 350 square metres, 14.5 per cent between 351 square metres and 400 square metres as well as 32.7 per cent between 401 square metres and 450 square metres while the remainder 25.5 per cent of available land sits between 451 square metres and 625 square metres,” Mr Portelli said.

“Greater Geelong and Bendigo’s median house and land prices remain more affordable than metropolitan Melbourne as well as each of the region’s median established housing prices.”

According to Cordell data, Victoria’s construction annual growth rate is 7.1 per cent which is 0.1 per cent more than NSW but less than Queensland and Western and South Australia.

Red23 expect that once the cash rate increases and is passed on by financial institutions, they will expect to see established housing values stabilise as well as land prices in the greenfield areas.

For households with existing debt, they expect the household income to debt ratio to increase creating sensitives in their spending habits.

Red23 is seeing consumer confidence beginning to cool due to media predictions of early rate hikes and falling property values.

However, due to restricted land availability and limited variety of land sizes in the market, Red23 are also seeing a decrease in land sales, and for now, expect gentle price increases will continue with caution.