Geelong region sees a surprise jump in new land sales while broader Melbourne dips

Market jitters continue to have an impact on the region’s real estate market, but research has found residential land in our neck of the woods is defying the broader market.

New land sales in the Geelong Growth Corridor have lifted 7 per cent, defying a drop in sales across Melbourne’s broader growth regions, a new report by RPM Research, Data and Insights shows.

RPM’s latest Greenfield Market Report revealed Geelong was the only of Melbourne’s four growth regions to record an uptick in sales in the first quarter of 2023, as demand and supply recovered following the previous quarter’s long-term low.

In total, 173 lots sold during the quarter, while new land releases increased 45 per cent in line with a rise in estates actively selling, which saw 145 new lots introduced to the market.

The median lot price also increased 1 per cent to $389,000, sitting above the average across the broader Melbourne region of $380,900, while the median lot size remained static at 400sqm.

However, while headline prices held firm, buyers across all regions were able to take advantage of an increase in rebates and incentives, saving an average 5 per cent, equating to about $25,000.

Land sales across Melbourne’s broader growth regions dipped 9 per cent during the quarter to just 1,879, down from a high of 7,855 in the third quarter of 2021 and consistent with the previous pre-pandemic cyclical low in teh second quarter of 2019 when 1,865 lots sold.

RPM managing director of project marketing Luke Kelly, said Geelong’s upward trajectory was underpinned by strong investor appetite for the region.

“Investors made up 43 per cent of purchasers during the quarter, the highest of Melbourne’s growth regions, zeroing in on this area because of its desirable location and the significant investments being made in infrastructure and economic diversification to support its growth.

 

“Upgraders and downsizers led the charge when it came to owner-occupier buyers, which has driven demand for larger homes, with 38 per cent of buyers planning to build sizeable abodes measuring more than 30 squares.”

Mr Kelly said a positive sign was those walking into new land estates across the Melbourne and Geelong growth regions had already done their research and were prepared to act, with 43 per cent making their buying decision on their first visit, up from 39 per cent last quarter.

“Buyers who understand their borrowing capacity and are in a position to purchase are seeing the opportunity in the market, with more choice available and a genuine willingness from developers to negotiate, particularly on titled lots.

“Those with a longer-term view are also deciding to get in now at today’s prices to secure land that may not settle for 12 months or so, meaning they won’t start paying their mortgage until what is a potentially different interest rate environment.

“We’re already seeing a number of bank and non-bank lenders lowering their fixed home loan rates, indicating the rising interest rate cycle could be nearing an end, with the Commonwealth Bank of Australia even anticipating a rate drop toward the end of the year.”

Mr Kelly said, however, on the whole consumer confidence remained low, following 11 interest rate rises in 12 months, the rising cost of living and continued caution around the building industry.

“The reality for many is that their purchasing power has been significantly reduced by interest rate rises and cost of living pressures, so they’re assessing their options in terms of adjusting their buying expectations or delaying their purchasing decision.

“While we saw signs of improvement in sentiment following the Reserve Bank of Australia’s decision to hold rates in April, the May rise is likely to again dent this.

“We believe it will take several continuous months of interest rate holds to see any meaningful turn-around in confidence, so we’re anticipating signs of improvement toward the end of the year.”

He said the limited sales activity in the new land market would result in significant pent-up demand, with 18,000 lot sales required per year to service population growth in Melbourne and Geelong’s growth regions.