RESEARCH by Oliver Hume Real Estate Group has revealed that the December quarter of 2010 delivered a median available-land price above the median cost of a new home for the first time on record.
The median land price in Melbourne's growth areas reached $225,750, an increase of more than 6% over the quarter and 25% over the last 12 months. While the median construction cost of a new home was $218,825.
Oliver Hume Research's growth-area 'House and Land Package Index' increased by over $15,700 in the December quarter, with 83% of the increase attributable to growth in the median price of land.
This has occurred despite slowing population growth in Victoria. Over the 12 months to June 2010, Victoria’s population increased by 99,300 or 1.8 per cent. It is the first time Victoria recorded a population increase of less than 100,000 since 2007.
The December quarter of 2010 saw a total of seven new residential communities, totalling 3,300 lots when fully developed and making up a total of 28 new projects launched in the 2010 calendar year.
The research also found that the median lot size in the first stage of each new project in the December quarter fell to 425 square metres, down from 484 square metres in the September quarter.
Read below for the Melbourne growth area land market report for the December quarter, 2010, by Oliver Hume Real Estate Group.
RESIDENTIAL COMMUNITIES - MELBOURNE’S GROWTH AREA LAND MARKET - December Quarter 2010
Oliver Hume Real Estate Group - Edition 23
You will recall that the third quarter of 2010 delivered a growth-area median land price just short of the median construction cost of a new home in Melbourne's growth areas.
Not to be outdone, the December quarter of 2010 delivered a median available-land price above the median cost of a new home for the first time on record.
The median land price in Melbourne's growth areas reached $225,750, an increase of more than 6% over the quarter and 25% over the last 12 months.
The median construction cost of a new home was $218,825.
Oliver Hume Research's growth-area 'House and Land Package Index' pushed up by around $15,700 in the December quarter; with 83% of the increase attributable to growth in the median price of land.
All Residential Communities - Indicative House and Land Package Index- December Quarter 2010 (click to enlarge):
All this in an environment where Victoria's population growth over the 12 months to June 2010 slowed, falling below 100,000 for the first time since 2007 (to 99,300 persons or growth or 1.8%). This reflects a decline of 18% over the previous 12 months to June 2009 (down from approximately 121,000 persons).
Net overseas migration remains the primary driver of population growth in Victoria, accounting for 61% of the increase. Natural increase contributed 37%, net interstate immigration only 2 per cent.
Victoria still accounted for 26% of Australia' population growth in the 12 to months June 2010 (1).
Positive news is that growth-area retail supply (the number of lots available for sale, both titled and pre-selling), continues to trend up from what appears to be the bottom of the cycle in June 2010. In the December quarter, supply increased by 21% to around 1,050 lots, and by about 90% since June 2010.
On average, each growth-area municipality contained around 175 available lots - albeit only 11 lots per project. Based on the current project sales rate, his still equates to 1.3 months supply, largely in line with the monthly supply at the same time in 2009. Six months supply is considered to be the industry benchmark; last experienced in the September quarter 2006.
Retail supply sits around 50% below the long run median of approximately 2,100 lots.
The relationship between retail land supply and the median land price is evident.
All Residential Communities - Retail Supply - December Quarter 2010 (click to enlarge):
The December quarter of 2010 delivered a total of seven new residential communities, totalling 3,300 lots when fully developed. Three of the seven projects were located in Whittlesea (say 470 lots), with one each in Hume, Casey, Melton and Wyndham (encompassing VicUrban's 'Riverwalk', circa 2,400 lots).
New projects released during the quarter took the total number of new projects launched this calendar year to 28, a combined fully-developed yield of 13,500 lots. The fully-developed yield of the 28 projects is 87% more than in 2009 (23 new projects, 7,200 lots) and 41% up on the average since 2006.
On average, around 18 projects and 9,500 lots fully developed are launched per annum in Melbourne's growth area municipalities.
New Residential Communities - Total Projects and Fully Developed Yield per Annum: 2006 - 2010 (click to enlarge):
Concerns about affordability remain well founded: the median land price across all new releases during the quarter pushed through the $200,000 barrier, hitting a median price of $220,000 (up from $199,000, $186,000 and $175,500 in the last three quarters of 2010).
The median lot size in the first stage of each new project in the December quarter continues to fall; 425 square metres, down from 484 square metres in the September quarter.
The most affordable lot released in the December quarter was $173,000 in Cranbourne: and that was 4.8% higher than the most affordable lot in the previous quarter (2).
Allowing for projects that have been withdrawn from the market, completed or released, fully-developed yield has risen to just over 109,000 lots across 98 residential communities.
Among the municipalities, the City of Whittlesea leads the way with 28% of all projects, followed by Wyndham with 24%. Whittlesea and Wyndham are on par in terms of fully-developed yield.
All Residential Communities - Total Projects and Fully Developed Yield - December Quarter 2010 (click to enlarge):
Of note, only 6% of the fully-developed yield is within Cardinia (around 5,000 lots below the next municipality, Casey, which is also in the south-east corridor).
Over the 5 quarters to September 2010, around 40% of dwelling approvals in the Casey-Cardinia corridor were in Cardinia (67% in the June quarter and 75% in the September quarter); compared to 29% in the 5 quarters to September 2005.
Cardinia is our second most affordable growth-area land market and a historically affordable market.
Moreover, with rising land prices, Oliver Hume buyer profiling shows that first-homebuyer activity in Cardinia has fallen to 35% of the market. It would appear that, even with a median land price in Cardinia well below Casey's, first homebuyers in the south east are being priced out and moving to peri-urban areas such as Drouin (and Warragul).
Any future amendments to the urban growth boundary (both expansion and contraction) should bare the above-mentioned in mind.
On a municipality basis, the strongest price increase over the last 12 months was in Wyndham and Melton - up 51% and 39% respectively over the last 12 months. Melton can boast that it has the most affordable median at $175,500. Only two municipalities have a median land price below $200,000. But for how much longer?
Melbourne's newest growth front, Mitchell (Wallan / Beveridge) recorded an increase of 17.4% over the last 12 months (3).
All Residential Communities - Median Land Price and Land Area - December Quarter 2010 (click to enlarge):
(1) Australia’s population growth slowed markedly, net immigration fell by 31% to around 215,000 in 2009-10 (as at June quarter) and total population growth fell by 19% to just over 377,000.
(2) The median land price encompassing all growth area municipalities was around this ‘new’ release price in the December quarter of 2009 ($175,000).
(3) The Shire of Mitchell (Wallan / Beveridge) is not included in any of the above mentioned growth area analysis.
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.
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