Demand for Geelong land softens as buyer interest falters
The vacant lot market in new estates across the Geelong growth area has slowed, with lot sales for the September quarter now down to what would have been previously sold by one or two developers in a month in Armstrong Creek alone.
Buyers are jumpy, and rightly so, after originally being told by the RBA that rates wouldn’t rise until 2024, and builders struggling to source materials in a timely manner, and some going under; wait and see seems to be the current holding pattern.
RPM Research also points to Geelong’s relatively high new land price that is suppressing sales, with parts of the growth corridor now more expensive than Melbourne, according to latest Data and Insights Greenfield Market Report.
RPM data shows sales rose by a modest 1 per cent to 137 lots in the September quarter, following a 26 per cent drop to just 134 lots in the previous quarter.
The median lot size also expanded 13 per cent to 400sqm, which fuelled a 4 per cent increase in the median lot price to $401,100.
Geelong made up just 7 per cent of total lot transactions across Melbourne’s growth corridors with the high cost of land relative to the other corridors – the South Eastern, Western and Northern Corridors – keeping a lid on demand.
That high cost is demonstrated by the median per square metre rate for lots in Armstrong Creek, which is approaching $1,100/sqm, and Bellarine, at $1,100+/sqm, being more expensive than many of Melbourne’s growth areas.
RPM national managing director of project marketing Luke Kelly said developers in Geelong were holding off releasing new supply, which was down 57 % to a decade-long low of 63 lots, as the average time on market pushed out to about five months.
“The high median sale price was proving a challenge for prospective buyers.
“The corridor had the lowest proportion of first-home buyers, making up just 41 per cent of owner occupiers who purchased in the region, which indicates those stepping into the market are struggling to overcome the affordability challenge.
“On a positive note, the sluggish demand will spur Geelong developers to offer deals aimed at moving stock in the weeks leading up to Christmas.
“Developers have less than two months to shift the titled stock on their books before the festive season, which has led to a significant increase in incentives being offered to buy now, which are sitting in the range of 5 to 10 per cent off the headline price.”
It is not just the developers putting out these incentives – builders have joined the party as well, with the combination of developers and builders working in harmony to drive significant savings in the order of $50,000 or more for new purchasers.
This means buyers looking to purchase can capitalise on the incentives in the market.
Some may not settle on their lot for 12 to 18 months when the cycle may have turned, meaning potential capital gains alongside a different interest rate environment.
The latest Greenfield Market Report shows lot sales across the Melbourne and Geelong growth areas fell 6 per cent to 2,023 lots in the September quarter with sales for the 12 months to September 2023 down by 58 per cent to 8,129 lots.
It comes after sales rose 13 per cent in the second quarter to 2,146 lots, fuelling hopes of the start of a recovery.
The median lot price across the corridors rose by 1 per cent in Q3 to a new record of $389,000, although that figure does not include the 5 to 10 per cent developer incentives being offered to buyers off the headline price.
New supply fell to a new low of 1,538 lots – down 17 per cent from the previous quarter with the average time on market blowing out to five months.