“Our prediction in the last quarterly report that the land market has bottomed out, has eventuated,” RPM’s head of communities Luke Kelly said.
Catering largely for struggling first-time buyers sensitive to both house prices and job security, sales of new land lots in the growth corridors around Melbourne and Geelong have traditionally lagged behind established housing.
But like much of Australia’s housing market, lower mortgage rates and improved access to credit appear to have spurred demand for land lots.
Melbourne’s established house prices rose 5.5 per cent over the three months to October, the largest gain of all capital cities, according to another data provider, CoreLogic.
The turnaround has been strong enough to prompt some economists to warn that regulators may have to tighten lending standards to avoid another housing boom.
That renewed confidence has also spilled over into housing estates, encouraging “move-up” buyers to sell their current home and upgrade to new house and land packages, Mr Kelly said.
The upswing in sales activity has not led to a significant rise in land lot prices.
Greater Melbourne’s median lot price edged up slightly to $315,500. During the previous quarter it was $310,000.
Mr Kelly said if developer incentives and promotions – still common across the industry – were factored into the price of lots, the median lot price would fall below $300,000.
“If buyer confidence continues to strengthen, incentives and rebates continue to materialise … we will likely get back to a stable and sustainable market by mid-2020,” he said.
Median lot sizes, which have also been trending down for the last three years, have started to increase, up 1 per cent to 395 square metres.
During the slump, developers cut the size of lots dramatically rather than bumping up prices.
Lot sizes were still at historically low levels, reflecting buyers’ price sensitivity and developers’ moves to reconfigure housing estates to include a larger proportion of townhouses.
The number of townhouse lots sold was up substantially, from 4 per cent of total lots a year ago, to 19 per cent in the September quarter.
RPM’s data, which also tracks sales of apartments, shows an increase in the number of boutique developments of between 15 to 20 apartments and townhouse projects.
Large tower-style apartment projects, predominantly in the inner-city, “continue to struggle,” it said.
“The banks’ still tight scrutiny on expenditure for mortgage applicants means the entry point for apartments at around $450,000 is still out of reach for many buyers whose borrowing capacity has been diminished,” the group’s transactions and advisory director Christian Ranieri said.
Property Editor at The Age and BusinessDay journalist for Fairfax’s theage.com.au, smh.com.au, watoday.com.au and brisbanetimes.com.au.