Victorian residential lot price growth remained strong during the second quarter despite sales falling to their lowest quarterly total for two years as the market continued to stabilise following record growth levels, our latest Greenfield Market Report reveals.
Our second quarter Greenfield Market Report for 2022 shows lot sales across the Melbourne and Geelong growth areas fell 14 per cent to 4,534 – down 41 per cent year-on-year – representing a return to the historical average of 4,500 sales per quarter.
The fall in sales volume failed to dent lot price growth, with the median sale price up 3.6 per cent to $379,000, translating to 9.6 per cent growth this year to date.
RPM Managing Director Project Marketing, Luke Kelly, said today’s buyer faced multiple challenges that weren’t present two years ago.
“Many buyers have been forced to re-assess their borrowing capacity and re-evaluate their buying decisions in light of interest rate rises, including the most recent 0.5 per cent increase in the cash rate to 1.85 per cent,” Mr Kelly said.
“At the same time, they’re facing increasing residential construction costs, rising living expenses fuelled by inflation and higher home loan repayments.
“This is leading to a subdued market in the coming months, with a number of prospective buyers deciding to sit on the sidelines as a result of the uncertain climate, resulting in declining month-on-month sales activity.
“Thankfully the new home market is already adapting to these challenges with product offerings including more townhomes, small lot housing and smaller conventional lots to meet buyers’ needs.
“We have already seen this represented in sales activity for the second quarter, with new releases incorporating smaller lot sizes in their offering and accounting for more than two thirds of sales.
“This will help to buttress the fall in vacant lot sales heading into the second half of 2022.”
Mr Kelly said there is a case for cautious optimism given the expected return of migration, low rental vacancy rates, and demand from developers in the englobo sector.
“This is not a long-term slowdown as market fundamentals remain sound and developers are already showing innovation in their product offerings,” he said.
“We’re seeing developers invest in new premium greenfield sites for affordable lifestyle communities as they position themselves for the recovery.”
RPM Managing Director Transactions and Advisory, Christian Ranieri, said historically the englobo sector had been insulated from the problems impacting the broader market.
“Greenfield development sites, particularly around Melbourne, are scarce and developers need to buy sites even during downturns to ensure they have a pipeline,” Mr Ranieri said.
“These factors, including the continued strength of the industrial market, recently dubbed the tightest market in the world, mean the englobo sector won’t see the same downturn as the residential land market.”
Corridor market growth in Q2 2022
This article references our Q2 2022 Greenfield Market Report. For the full report, click here.