As land sales falter, could Geelong’s softer market stimulate buyers?

Geelong land sales falter as buyers take a cautious approach, holding little faith in the predictions from the Reserve Bank of Australia (RBA) after falling for previous forecasts that led some home buyers down the garden path.

But is this lacklustre greenfield market on the cusp of turning?

This market dipped as buying an existing property was looking to be a better option than the cost of buying land and building, but with the established market starting to improve, and vacant lots at their best value for some time, this could flag the beginning of a turnaround in the new home market.

A recent market analysis by the RPM Group shows a slow market and decreasing price per square metre offers prospective buyers value for money in the weaker Geelong market.

RPM’s Q1 2024 Victorian Greenfield Market Report showed a median lot price increase of 3 per cent to $406,000, however this was underpinned by a rise in the median lot size of nine per cent to 437sqm, resulting in an overall decrease in the price per square metre.

Despite the value in the Geelong market, the report shows sales plunged 28 per cent to reach a new long-term low, with just 98 sales recorded in the three months to the end of March – 46 per cent lower than the previous corresponding quarter.

Geelong continues to experience sustained weak demand and stands out as the only corridor where stock returns exceeded new lot releases.

The low demand for new homes has extended the average time between lot releases and sales up to 211 days, the longest among all growth corridors and a 14 per cent increase from the previous quarter.

RPM national managing director of project marketing Luke Kelly said the Geelong market remained highly challenged by affordability and reduced new supply.

“We did see new supply increase 51 per cent to 89 lots compared to the past quarter, however that is well below the long-term average.

“The high price for lots, which is second only to the South East, is making it difficult for buyers facing cost of living pressures and reduced borrowing capacity to get into the market.

“While the price per square metre has come down, the market needs more incentives to spark action from buyers waiting on the sidelines.”

Meanwhile, across Melbourne and Geelong, the report identifies that new land sales rose by 15 per cent in the year’s first quarter as positive signs emerged in the marketplace including slowing inflation and increased developer incentives.

The Q1 2024 Report recorded 2,037 sales for the March quarter, with sales seven per cent higher for the 12 months to March – the first annual increase across four quarters since the fourth quarter of 2021.

Mr Kelly said that despite considerable challenges in the market, there were several positive takeaways from the quarter.

He said some of the heat had come out of inflation, although CPI increases remained sticky.

“The federal government flagged in the recent budget that it would be reducing migration and that should help to reduce inflation.

“Having said that, the Reserve Bank of Australia may not cut interest rates this year despite cost-of-living measures in the budget such as the $300 per household energy rebate.

“Inflation remains a big problem for buyers as it continues to erode household finances, which may offset the benefits of stage 3 tax cuts and could result in borrowing capacity for low-to-middle income households reducing by five per cent.

“On a positive note, interest rates are expected to remain stable this year and not move higher.”