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Written by Urbanalyst Staff    Tuesday, 08 May 2012 10:01    PDF Print
Melbourne growth area land market report: March quarter 2012
In the News - Victoria

RETAIL land prices in Melbourne's growth areas have not recorded any growth for 15 months, according to Oliver Hume's latest Melbourne growth area land market report.

The report says the impacts of slowing population growth, falling consumer confidence, a soft established housing market, rising retail land supply and purchasers' ability to secure finance all appear to be mounting.

While at the peak of the market in 2009/10, settlements averaged around 16,000 - 17,000 a year, it is estimated that the 2012 calendar year will yield around 10,000 settlements.

During the quarter, 10 new communities were launched, which will result in more than 3,400 lots when fully-developed.

The median land price across the ten new projects was $196,250 or $186,250, including incentives. The median price of a 448 square metre block remained at $197,700.

Read below for the Melbourne growth area land market report for the March 2012 quarter, by Oliver Hume Real Estate Group.


RESIDENTIAL COMMUNITIES - MELBOURNE'S GROWTH AREA LAND MARKET - March Quarter 2012

Oliver Hume Real Estate Group - Edition 28

The impact of slowing population growth, falling consumer confidence, a soft established housing market, rising retail land supply and, perhaps most importantly, potential purchasers' ability to secure finance, all appear to be mounting [1].

It's now 15 months since we have experienced any growth in retail land prices in Melbourne's growth areas.

During the quarter, prices fell: by $4,550 or around 2.1 per cent to $210,000.

Prices have now dropped by almost $16,000 from their peak of $225,750 in the December quarter 2010: a fall of 7.5 per cent over the 15 months.

The fall in some municipalities has been more dramatic than others, with Whittlesea and Hume slipping by 11.5 per cent and 8.4 per cent respectively since the December quarter 2010.

At the other end of the scale, Melton and Wyndham have fallen by only 1.4 per cent and 0.1 per cent respectively.

Perhaps the worst is yet to come for these municipalities as growing retail supply flows through (see following table).

If incentives are included, the net effective land price is now $200,000.

Retail supply continues to climb and now exceeds 3,700 lots; an increase of around 15 per cent or 500 lots over the quarter.

Based on current project sales rates, current supply represents 6.8 months sales; exceeding the industry benchmark of

6-months for the first time since the September quarter of 2006.

All municipalities experienced a rise in supply - some far greater than others.

In Mitchell (Wallan-Beveridge), there is around 20 months supply: up from 7.1 last quarter and 1.5 some twelve months ago.

The Shire of Melton, once the most constrained growth area market, is the only other municipality with a double-digit level of supply.

The City of Hume is now the tightest market.

RETAIL SUPPLY, MONTHS, MARCH QUARTER 2012

There are some positives: project sales rate trended up marginally during the quarter; largely underpinned by what appears to be a pull forward in first homebuyer demand as state incentives are mooted to cease as the government looks to minimise a budget blow-out due to falling revenues [2].

Hume recorded the strongest project sales rate, around 8 sales per project per month, followed by Casey with 5 sales per project per month.

The monthly project sales rate across all projects is around 4. Project sales rates for the top ten projects dipped slightly, falling to around 13 a month [3].

Analysis of all growth areas during the quarter shows that around 60 per cent were less than 450 square metres [4].

PROJECT SALES, BY SIZE, MARCH QUARTER 2012

 

During the quarter 10 new communities were launched: more than 3,400 lots when fully-developed.

Four of the 10 projects were located in Wyndham, three in Melton, two in Whittlesea and one in Hume [5].

Three of the 10 projects offered a rebate immediately.

Oliver Hume Research's low-scenario forecast suggests that by the end of 2012 there will be no fewer than 140 residential projects competing for a diminishing number of sales.

At the peak of the market in 2009/10, settlements averaged around 16,000 - 17,000 a year. It is estimated that the 2012 calendar year will yield around 10,000 settlements.

On a per project basis, this equates to around 70 - 80 sales a year; down from the peak of the market where that number was around 170 - 180 a year.

FORECAST NEW COMMUNITIES AND SETTLEMENTS, AS AT DECEMBER QUARTER 2012

That aside, the real uplift in project supply is not expected until 2014/15, when numerous Precinct Structure Plans (PSPs) will be completed [6].

With an estimated 200,000 PSPs approved lots in 2013 (net of annual take-up); supply will be underpinned by Wyndham and to a lesser extent Melton.

PSP APPROVED SUPPLY, AS AT DECEMBER QUARTER 

 

The median land price across the ten new projects was $196,250 or $186,250, including incentives. The median price of a 448 square metre block remained at $197,700.

Taking account of projects that have been withdrawn from the market, completed or released, fully-developed yield totals around 126,200 in 133 projects: the highest on record [7].

TOTAL PROJECTS AND FULLY-DEVELOPED YIELD, MARCH QUARTER 2012

In terms of projects, Wyndham contains 26 per cent of all projects, followed by Whittlesea and Casey with 22 and 17 per cent respectively. Doreen and Point Cook, with 11 and 10 projects respectively, are the dominant suburbs, followed by Tarneit, Pakenham and Truganina, each with nine.

As mentioned, across the 133 projects, the median land price is $210,000 or $200,000 with incentives; the median land area dropped slightly to 447 square metres.

Mitchell (Beveridge-Wallan) continues to underpin the market in terms of affordable product, with a median price of $170,250, followed by Melton, with $173,000.

The most expensive land is in Wyndham.

MEDIAN RETAIL LAND PRICE AND LAND AREA, MARCH QUARTER 2012

 

NOTES

[1] In terms of consumer sentiment / confidence, Victoria has the lowest level of all mainland states. Source: Westpac.

[2] Across Oliver Hume sales, first homebuyer comprised around 55 per cent of all sales during the March quarter; peaking at 68 per cent in the month of March. Investor levels have remained largely unchanged, at about 14 per cent.

[3] The top 10 projects comprise around 13 per cent of total retail supply, some 480 lots.

[4] Around 53 per cent of all sales during the March quarter 2011 were less than 450 square metres.

[5] On average over the last six years, around 18 projects and 9,500 lots are launched each year in Melbourne's growth area municipalities. Last year alone, some 34 projects were launched injecting around 24,500 lots into the market, end yield.

[6] In reality, post delivery of the PSP, there is generally a 12-18 months lag before retail product reaches the market. It should be noted, however, that much of the future supply is controlled by a limited number of players: each corridor is different to the next and actual timings may vary.

[7] In the corresponding quarter twelve months ago, there were 108 projects: with a median land price of $225,000 and a median land area of 472 square metres.

AUTHOR NOTES

Andrew Perkins, National General Manager - Research, Oliver Hume Real Estate Group <http://www.oliverhume.com.au/>.

Oliver Hume Real Estate Group is the marketing agent behind more than 57,000 residential products along the eastern seaboard of Australia, representing Australia's leading public and privately listed companies.

In Victoria alone, over the past 11 years Oliver Hume Real Estate Group has successfully delivered more than 200 residential projects, settling in excess of 5,000 residential products per annum.

It has offices in Melbourne, Sydney and Brisbane and is active in both land and medium density and high market segments.

DISCLAIMER

The information has been produced as a general guide and does not constitute advice. Whilst the information has been prepared in good faith and with due care, no representation is made for the accuracy of the whole or any part of the publication. No liability for negligence or otherwise is assumed for any loss or damage suffered by any party resulting from their use of this publication.

The whole or any part of this publication must not be reproduced, mirrored or copied without written consent.

URBANALYST NOTE

This article was submitted to Urbanalyst by a third-party. Aside from minor editorial modifications, this article is presented as-is.

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