Our latest Greenfield Market Report has found that gross lot sales in the Melbourne and Geelong growth areas have risen by 13% in the last quarter, halting a trend of declining sales activity over a six quarterly period since Q4 2021.

This is likely to have been incentivised by enticing developer discounts and rebates offered in the new home market. Despite these discounts, the rebates are only partially offsetting the considerable barriers to entry across the new home market.

Affordability remains a very real challenge – the 6% annual increase in the Consumer Price Index (CPI) to June has put a significant strain on household finances, as has the further reduction in borrowing capacity marked by an additional 25 basis point cash rate rise in May and June.

Purchaser sentiment remains relatively fragile as evident in the 53% annual decline in total gross lot sales for Q2 2023 (2,146 sales). Additionally, the prolonged average trading days for lots sold in Q2 (exceeding 100 days) and low absorption rates have delayed the release of new land supply from developers. The stock returns on the market have increased in line with the current interest rates but remain below the peak observed during the 2020 lockdowns.

Notwithstanding market headwinds and weak purchaser confidence, Melbourne’s median lot price increased by 1.3% to reach a new quarterly record of 385,000. This growth is attributed to a similar 1.4% increase in the median lot size to 355sqm, stabilising the price per square metre rate. This median lot value is also more in line with the headline figure, supported by the discounts offered during Q2 – implying the new price for purchasers could be 5% to 10% less.

This article references findings from our Q2 2023 Greenfield Market Report. For the full report, click here.