Melbourne’s land market is under enormous levels of strain as massive demand for new housing places upward pressure on land sales and prices.
Unveiling the results of its latest National Land Survey Program, the Victorian branch of the Urban Development Institute of Australia indicated that the volume of sales of vacant residential land which are currently taking place have been at or near record levels for five consecutive quarters, and are now at around three times their level compared with the low point of the most recent cycle in mid-2012.
Leading the charge are the markets of Wyndham in the south-west and Hume in the north, which accounted for 30 per cent and 18 per cent of sales in the most recent quarter respectively.
The Casey market in the south east also remained strong, accounting for 20 per cent of all sales during the quarter.
Amid such demand, levels of stock which are ready and available for sale are down to around 1.4 months’ worth of sales – the lowest level on record in almost six years and well below the four months’ worth which is generally considered to constitute a balanced market.
In Sunbury, less than a week’s worth of stock was available as at the time of data collection for the survey.
Not surprisingly, the market for residential land throughout Melbourne is being driven by a surge in new home building which, along with massive levels of new apartment construction, has seen a rise in the number of detached house commencements over the 12 months to March compared with the same period two years’ earlier in the order of 20 per cent (Victoria wide).
All of this is putting upward pressure on prices which, despite having risen slower than sales volumes, are still up by around 20 per cent over the past three years.
In its report, UDIA points out that median land prices in Melbourne ($218,000) remain lower compared with Sydney ($245,000) and also more affordable compared with Brisbane and Perth.
For now, it says upward pricing pressures are being restrained by a desire for projects to secure market share, but it questions how long this will last.
“The March quarter represents a high point in the market cycle,” UDIA says in its report. “Sale volumes have peaked, production levels are now at capacity and prices are still very much affordable.”
“This combination is likely to see more projects push prices higher.”