Lot sizes down as prices go up

There was a rebound in confidence in the housing market during September according to Westpac – Melbourne’s Institute Index of Consumer Sentiment (September 2021), the ‘time to buy a dwelling’ index lifted 8.8 per cent.

This lift, recovered all of the decline we saw in August; however, the Index is still 26.8 per cent below its November 2020 peak and similar to the lows we witnessed in previous cycles since the Global Financial Crisis.

Red23, specialist sales and marketing partners for land developments, medium density and mixed-use property development projects across Victoria, report that as prices continue to increase in the established and new homes market, affordability has again become an issue.

Red23 managing director Terry Portelli said that presently, we are experiencing an increase in investors as they are encouraged by rising prices and the prospect of capital gains, while owner occupiers are responding to deteriorating affordability.

“Deteriorating affordability in the middle ring areas will see many families move further out to greenfield and regional areas or accept living in a smaller townhouse or apartment,” Mr Portelli said.

“For the moment, detached houses are preferred over medium density living due to the pandemic, however, this trend may soon come to an end.

“Land sales will remain strong as we approach the end of the year and with talk of interest rate rises to temper a hot market, next year, we may see a cool in sales early to mid-next year.”

The new data shows that land sizes have decreased by three per cent in metropolitan Melbourne and 17 per cent in Greater Geelong in the last 24 months as prices increase.

The metropolitan Melbourne median land size is currently 388sqm and 400sqm in Greater Geelong, a traditional 400sqm land size has been superseded by a 350sqm lot.

Blocks which are 350sqm are most affordable in Mitchell Shire with an entry price of $245,000 followed by Melton South at $272,000.

Wyndham also offers this block size at Mambourin for an affordable price of $283,000 and in established areas such as Point Cook, this size block is $469,000 and in Cranbourne, it is $366,000.

Comparing these lot prices to the same time in 2019, it was $390,000 in Point Cook and $330,000 in Cranbourne, in 2019, it was the most affordable in Strathulloh at $190,000.

The median land price increased by one per cent in August to $332,400 and by four per cent from 12 months ago.

In a strong market, there were big price movers this month with Whittlesea and Melton moving up to second and third place.

Casey’s median land price has fluctuated up and down over the last three months due to stock availability.

In the short-term, demand for land in all catchment areas remains strong and land availability is anticipated to slow with limited land releases expected for the remainder of 2021 as land title timeframes push well into 2023.