Victoria’s greenfield land market closes out 2021 on a high

The RPM Group’s most recent report on residential land supply shows that greenfield lot prices hit a 2021 high in quarter four, increasing by 6.4 per cent to a record $347,000 across Melbourne and Geelong’s growth areas.

The report showed that buyers finished the year exiting lockdown with an intent to purchase, with 6,793 lots sold during the quarterly period to year’s end, up two per cent on quarter four 2020.

Victoria’s englobo land sector continues to respond to the demand, with activity eclipsing previous market peaks.

A total $3.8 billion in major land transactions were recorded in 2021 and greenfield land transactions totalled over $1.2 billion in the December quarter alone.

The Western Growth Corridor continued to dominate sales activity across the growth areas, whilst the Geelong Growth Corridor experienced the largest reduction in gross sales on both a quarterly and annual basis declining to 700 lots in December quarter 2021.

Consequently, the corridor’s share of total gross lot sales fell to a long-term low of just 10 per cent.

This contraction in sales activity can be attributed to active estate numbers almost halving in 2021, as new stages and new estates are being held back by endless red tape.

RPM’s fourth quarter Greenfield Market Report for 2021 demonstrated the ongoing strength of new home demand and the increasing numbers of buyers turning to greenfield lots and townhome development as a more affordable alternative to the established house market.

During the final quarter of 2021, 6,104 new lots were released in Victoria and momentum in sales activity led to average time on market reducing to just over a month.

Total lot supply on the market was reduced by 19 per cent to 2,300 lots.

RPM managing director project marketing Luke Kelly said that 2021 was a year of records for Victoria’s greenfield land market and it’s clear an increasing number of buyers have turned to it as a more affordable choice as median house prices soar well past the million- dollar mark.

“Key challenges that many developers now face as a result of burgeoning consumer demand is how to sustain supply in the market and effectively manage long title timeframes, caused by a construction backlog impacted further by nationwide materials and labour shortages,” he said

“This year, we expect to see more developers begin to drip-feed vacant land releases to give them time to catch up on construction and lower long-term risk factors.

“This supply deceleration, in combination with a high demand environment, will no doubt continue to apply upward pressure to vacant lot prices and buyers will need to continue to shift their expectations both in terms of price and delivery timelines.”

Median house prices in Melbourne again reached new heights during the quarter to $1,125,000 – a 4.2 per cent increase from the third quarter and 21.9 per cent higher than a year ago. Lot prices in Melbourne’s greenfield areas increased to an even greater extent by 6.4 per cent since the previous quarter, to an all-time high of $347,000.

Lot sizes continued to shrink, this time by 3.1 per cent to 380 square metres, with RPM predicting a continued growth in townhouse product from both a supply and demand perspective.

Mr Kelly said that looking at how prices are performing and with the potential of tougher borrowing restrictions, RBA rate rises on the horizon and international borders reopening, the need and popularity of townhomes is only set to grow, particularly among the first home buyer cohort.

The report highlights that 46 per cent of Victorian townhome purchasers in the 2021 December quarter were first home buyers.