Lot Sizes Determining Lot Price Movement
Melbourne’s median lot price escalated by a sizeable 6.6% over February, to a new record of $374,100. This growth was entirely attributed to the 7.0% rise in median lot sizes to 392sqm. In Geelong, a static median lot size of 400sqm kept the median lot size steady at $368,250. While lot prices remain undervalued compared to established houses across many growth areas, the scope for lot prices to rise further will be diminished by increasing home construction costs and cost of living pressures. Looming interest rate rises will also weigh on buyers when making their lot purchase.
Sales momentum continues
Growth areas of Melbourne, Geelong, Ballarat, Bendigo, and Macedon recorded 2,204 gross lot sales in February. An increase from January was expected, although the gain of 45% was considerable. This highlights the continued desirability of new homes in growth areas, given their relative affordability advantage compared to established dwellings and purchasers continuing to favour larger homes. However, lower supply is likely restricting lot sales from being even higher, with annual declines in new lot releases and total lot supply of 9.3% and 37.6% respectively.
South East Corridor Recovers
Although all growth corridors experienced a monthly increase in gross lot sales, the rate of escalation in the South East corridor was more than three times higher than the corresponding growth rate in the Western corridor. As a result, the proportion of gross lot sales in the South East corridor improved 4% to 20%, at the expense of a declining concentration of sales in the Western corridor (-5% to 38%).
Increased Housing Construction Costs
The average value of detached house approvals increased by a significant 12% since January last year. Building materials including those used for residential construction have not been immune to pandemic induced supply chain disruptions impacting the wider global economy. Initially, the HomeBuilder Grant offset some of these increases. However, with its influence phasing out from the second half of 2021 , prices have continued their upward trajectory.