Falling supply supporting lot prices
During the last two months, the reduction in new lot supply to levels below weak lot absorption is helping to stabilise lot prices. This is also resisting the downward pressure to prices from rising interest rates and the subsequent diminished borrowing capacity and purchasing power of buyers. This is evident by the 1.3% rise in Melbourne’s median lot price to $380,000 in October, with commensurate growth in the per sqm price after the median lot size remained static at 350sqm. Moreover, Geelong’s median lot price reached a new peak of $411,000, after escalating by 8.4% over the month. While this growth was primarily attributed to the 6.2% enlarging of its median lot size to 411sqm, price growth still outpaced the increase in lot size, leading to modest per sqm price growth.
Gross sales continue to slide
Gross lot sales across the growth areas of Melbourne, Geelong, Ballarat, Bendigo, and Macedon contracted by 1.3% over October, reflecting a significant slowing in the monthly rate of decline compared to the previous month (11%). However, this still reflects a continuation in the weakening trend in sales activity, which fell to a total of 923 lots. Buyer confidence remains fragile due to rising interest rates and elevated residential construction costs. Interestingly, there was a divergence in lot sales performance, with gross sales in Melbourne growth areas increasing by 2.9% over the month, while declining across most regional markets.
Increased sales activity in South East and Western corridors
A monthly escalation in gross lot sales of 9% in the Western growth area and 7% in the South East growth area led to their proportion of total sales activity rising to 39% and 17% respectively. In regional areas, Bendigo experienced an increase in its share of gross sales to 3.5%, although the opposite occurred in Geelong (down to 6.4%) and Ballarat (down to 5.1%). Notably, while Ballarat’s proportion of sales activity was in line with its share over calendar 2022, Geelong’s proportion of monthly lot sales was a long term low.
Census data reveals regional areas popular with interstate movers
Of those people living in a growth area at the 2021 Census, and reported as having a different address five years previous, between 40% and 50% moved within the same growth area in South East, Northern and Western. This proportion was above 50% in Geelong, Ballarat and Bendigo. Furthermore, around one third of movers to most growth areas came from within other parts of Victoria, with this share highest in Macedon at just over 50%. For Melbourne growth areas, purchasers were more likely to have moved from overseas than interstate, while it was the opposite for regional areas.