Shift in Geelong land affordability is good news for buyers

The topsy turvy residential land market in the Geelong region has created some uncertainty for new home buyers in recent years, with availability, interest rates, red tape and cost of living pressures all contributing to an uncertain market.

This, combined with the building and constriction industry finding it hard to meet home buyer demand, has led to a lot of caution in the market.

There may be some good news on the horizon though, with recent data from RPM Research indicating some pull back in the cost of land.

RPM says buyers looking to build a new home in Geelong can take advantage of a dip in new land prices, which is showing improved affordability.

RPM’s latest Q4 2023 Victorian Greenfield Market Report revealed the median lot value dropped 1.8 per cent in the December quarter to $394,000, while the median price per square meter fell below $1,000.

The decline comes on the back of near long-term low sales activity in the region, with just 137 lots changing hands in quarter four, a similar volume to the previous two quarters.

Developers continued to hold new land releases as a result, with just 59 new lots introduced to the market, a 6 per cent decline on last quarter’s decade low.

The report shows that the decline in sales in Geelong was in line with the broader Melbourne region, which recorded an average 12 per cent fall across its four growth corridors – including Northern, Western and South East – with a total 1,770 new lots changing hands.

Despite the fall in activity, prices remained stable in the broader Melbourne region during the quarter, declining just 0.5 per cent to an average $386,900, while the median lot size shrank 1.1 per cent to 350sqm.

RPM national managing director of project Marketing Luke Kelly said it had been an overall tough end to the year but buyers had entered 2024 with renewed confidence.

“Purchasers are recognising they are now in the box seat to negotiate a good deal, with the sustained period of constrained sales favouring a buyers’ market.

“Developers are continuing to offer incentives in the order of five to 10 per cent, saving an average of about $30,000, and the selection of titled lots available means purchasers can have their choice of homesite and start building immediately if they desire.

“The combination of expected rate relief with falling inflation is likely to improve affordability and ease cost-of-living pressures for everyday households.”

The federal government’s Stage 3 tax cuts is also expected to put more money back into people’s pockets from July, improving borrowing capacity by 4-6 per cent, which is good news considering rising interest rates have taken a 30 per cent bite out of purchasing power over the past 18 months or so.

Mr Kelly said there was an uptick in sentiment and sales during the four months to October when interest rates remained on hold.

“We expect to see that trend again, given the strong start to 2024.

“The greenfield market is critical to helping solve Victoria’s housing crisis, with forecast average population growth of 1.7 per cent over the next decade and international immigration, adding about 127,000 new residents to the state each year.

“The greenfield land market is best placed to meet the needs of our growing population and deliver the volume of relatively affordable property needed close to Melbourne CBD and key economic and lifestyle centres.”

He said buyers delaying purchasing decisions due to cost of living pressures, particularly in the younger age demographic, was contributing to burgeoning pent-up demand for new land.

To read the full RPM Q4 Victorian Greenfield Market Report, head to rpmgrp.com.au