‘Nonsensical’: Economist shuts down 10% price drop talk
A big four bank’s suggestion that Australia would see a 10 per cent dip in property prices over 2023 has been promptly...
A bumper quarter for land sales in the Melbourne area has lockdowns partially to thank, even while the latest COVID-related developments might hamper growth going forward.
Melbourne's gross lot sales hit a new record according to research from RPM, with 7,685 sales recorded in June quarter 2021 across the city and its fringe regions, 2 per cent above the previous quarter’s peak.
Moreover, the median lot price increased by 3.1 per cent, the highest rate of growth since March 2018.
While the rise could in part be attributed to buyers in Melbourne and its surrounds racing to take advantage of property incentives such as HomeBuilder before they ended in June, some of the surges could also be attributed to changing attitudes and trends induced by pandemic lockdowns.
“The shift in mindset as people work from home more, means not only are purchasers seeking property further out, but sophisticated developers are also snapping up englobo space with a view to satisfy these trends,” said Luke Kelly, RPM’s managing director of project marketing.
And with the median house price sitting at over $1 million across many areas, the established housing market has proven inaccessible for some.
“Land is undervalued in comparison and we’re seeing a very good mix of buyer segments responding and areas like Geelong, Mitchell, and Moorabool doing very well,” Mr Kelly said.
Mr Kelly described the current appetite for property in Australia as insatiable, while Christian Ranieri, RPM’s managing director of transaction and advisory, noted the demand had driven many in development to expand their purview.
“Developers who were previously reluctant to go too far are now looking well beyond the traditional Melbourne area and creating a price storm as they explore regional and peri-urban areas like Mount Macedon and the Bellarine Peninsula,” Mr Ranieri said.
With Australians stuck at home looking to upsize their space, it tracks that the new townhouse market has seen growth while apartment approvals were down. Town home approvals were up 11.4 per cent over the quarter to 3,072 – the highest quarterly result since December 2018. Apartment approvals, meanwhile, came in at 2,090, less than half the five-year quarterly average of 4,332.
But lockdowns and other pandemic pressures have nonetheless caused issues for those undertaking new builds.
“From a macroeconomic perspective, we’re being buffeted by both headwinds and tailwinds,” Mr Kelly said.
“There is also pressure on securing raw materials, which has resulted in delays on builds along with a sharp cost increase to the builder which is being transferred in part to the retail market. This will continue to impact potential purchaser confidence.”
RPM predicts sales volumes for lots will begin to decline as less stock is brought to market, prices rise and buyers hold off on purchases due to mounting anxiety over lockdowns, a slow vaccine rollout, and job security.
“The June quarter results suggest the market has moved through its peak and will see more modest gains over the coming year,” Mr Kelly added.
“Worsening affordability and less government stimulus will moderate price growth over the short term and developers will start to slow down release programs so that we have a smooth tapering of the market back to more normal conditions in likely 2022.”