Median Price Per SQM Continues to Fall
Since peaking in March, the median price per sqm for Melbourne and Geelong lots continues to decline. Factors contributing to this emerging trend include reduced borrowing capacity as interest rates rise, and higher cost of living pressures as inflation accelerates and stretches household budgets. After experiencing stronger lot price growth over the year to May, affordability concerns in Geelong have seen its median lot price fall by 3% to $371,500, with a commensurate reduction in its median price per sqm after the median lot price remained static at 392sqm. Melbourne's median lot price per sqm also decreased after lot price growth of 2% (to a median of $383,000) was outpaced by the 3% rise in lot sizes (to a median of 377sqm).
Sales Activity Continues to Moderate
New home demand has continued to moderate through May 2022. Growth areas of Melbourne, Geelong, Ballarat, Bendigo, and Macedon recorded 1,716 gross lot sales - marking a 6.7% decline from the previous month. May also saw the Reserve Bank of Australia (RBA) lift the cash rate for the first time since November 2010. While one 25 basis point increase in its exclusivity does not have a profound impact on confidence, the expectation of additional interest rate rises through the year (as witnessed in June) is driving more cautionary purchaser behaviours.
Sales Shift Away from Regional Areas
Monthly declines in gross lot sales of 27% in Geelong and 50% in Ballarat led to their proportion of sales activity diminishing to long-term lows of 7.8% and 2.9% respectively. Conversely, more marginal monthly falls in sales activity across the three Melbourne growth areas resulted in their share of total gross lot sales improving over May. The Western corridor recorded 43%, the Northern corridor 26%, and the South East corridor at 16%.
New Dwelling Approvals by Lot Size
Across the 2021 calendar year, the growth areas of the South East, Northern, and Western corridors reported approximately 50% new detached house and townhome approvals on lots sized between 200sqm and 400sqm. One-third of approvals were for lots sized between 400sqm and 600sqm, while 9% were on lots up to 200sqm. In Geelong, around 80% of new dwelling approvals occurred on lots between 200sqm and 600sqm, while Ballarat and Bendigo saw approval activity concentrated on lots from 400sqm to 800sqm.