Q4 23 VICTORIAN GREENFIELD MARKET REPORT
From our CEO • Interest rates peak with some leading economists predicting up to three rate cuts in H2 2024. • Inflation and cost-of-living pressures continue to stifle housing demand in the near term. • Wage growth and stage 3 tax cuts will alleviate cost-of-living pressures and assist mortgage affordability. • The greenfield sector remains best placed to meet the needs of the growing population.
The Victorian property market recorded 7,839 sales on a rolling 12-month basis, and 1,770 sales for the quarter, marking a 46% decline from the previous corresponding period; indicating a challenging year overall. However, as we step into 2024, there is a renewed sense of optimism amid the economic landscape. Q4 2023 proved to be particularly tough for the property market, indicating the November rate rise may have been premature. Further to this, new home loan commitments fell by a sharp 8.4% from November to December 2023. Throughout Q4 2023, prospective homebuyers faced tough economic conditions, deepened by the rate increase. Low retail figures and rising cost-ofliving pressures added to the uncertainty, although this combination also drove inflation to a two-year low. While retail sales saw a boost during the Black Friday and Cyber Monday period in November,
Victorian Greenfield Market Report - Q4 2023
December’s CPI remained low as consumers did not respond to the traditional holiday sales. With this lower CPI, it was unsurprising that the RBA held the interest rate steady in February. Looking ahead, we expect interest rates to remain steady in the first half of 2024, supporting the buoyancy of established housing market prices. Global geopolitical uncertainty continues to influence global supply and local pricing; carrying the potential to delay the CPI from reaching the RBA’s target range of 2% to 3%. Despite facing significant challenges over the past year, the property market has remained relatively stable, with minimal price erosion observed across most sectors. This stability is attributed to the imbalance between housing supply and customer demand. Discounts and rebates became more prevalent in Q4, with developers and builders offering enticing incentives into the new year.
Immigration, including the return of international students and workers, is contributing to economic growth but may be masking poor underlying economic fundamentals. Mortgage affordability is at its lowest level since 1990 in key markets including Melbourne and Sydney, requiring purchasers to have an additional 20% net income to match house price growth and higher interest rates. While interest rate relief is anticipated in 2024, its impact on household budgets may not be felt for 12 to 18 months. With the current economic outlook suggesting that interest rates have peaked, and inflation under control, the Government is focusing on addressing cost-of-living pressures with the stage 3 tax cuts. The Government has also outlined its intention to move towards the 70/30 policy, yet the policy is not best aligned to satisfy the growing need to build more than 200 homes per day to match demand – the greenfield sector remains best placed to meet the needs of our growing population.
Gary Dunne Chief Executive Officer gary@rpmgrp.com.au
Despite challenges, Q1 2024 may bring early signs of cautious optimism; potentially leading to increased property sales, especially if interest rates ease earlier than expected in August 2024. As other markets experience significant value increases, we may see a resurgence in Victoria’s property market in the latter half of 2024, driven by improving economic conditions.
For more information, please visit: www.rpmgrp.com.au For a detailed market analysis or a special report, email the team at: contactus@rpmgrp.com.au
2
What’s Inside
Economic and Building Indicators
05
Development Sites
06
Vacant Land Market
08
GDP growth remains positive, albeit slowing, while building activity is weakening as market headwinds impact purchaser sentiment.
Superlots have become focal points for developers seeking to unlock capital and for buyers seeking opportunities within established communities.
The market’s response to challenges was marked by the continuation of discounts and incentives to support sales activity.
Secondary Land Market
Townhomes
Outlook
41
Competition between the primary and secondary land markets is expected to remain with developers continuing to offer discounts and incentives.
Victorian Greenfield Market Report - Q4 2023
Townhomes and smaller lots offer the dream of homeownership without the price tag of a detached house.
43
30
Regional Markets The Ballarat and Bendigo regions maintain some affordability advantage compared to the Metropolitan greenfield markets.
47
Long-term high population growth is underpinning burgeoning pent-up housing demand, driven by newly arrived migrants and the return of cautious buyers.
3
A data-driven, holistic approach to property At RPM, we always start with in-depth research and data-driven insights. When we are guided by data, analysis and key findings, we maximise success.
RPM’s Research, Data & Insights division provides in-depth analysis on current local and overseas economic and property market conditions. The team consists of economists, property experts and GIS analysts who provide real-time market intelligence as well as analytical and strategic advice. Our knowledge and expertise are an invaluable resource for RPM’s developer clients, empowering them to make intelligent, informed, and strategic decisions when evaluating residential developments and investment opportunities. Our data and analysis help clients maximise their marketing efforts and achieve sales targets on their estates. Each month we collect extensive data on more than 600 land estates across the east coast of Australia, providing our clients a comprehensive understanding of the market dynamics. This also underpins the core strategic decision-making of our own business.
Victorian Greenfield Market Report - Q4 2023
Michael Staedler General Manager Research, Data & Insights
This rich data helps our team and clients to better understand: Volume of lots sold
Distribution of lots of a particular size
Dollar per sqm rates
Distribution of price points
Stock release levels
Activity levels by market, product, & developer
Volume of stock returned to market
Stock level fluctuations
4
Economic and Building Lead Indicators Cash Rate
AUS Unemployment Rate
Quarterly GDP
AUS Population Change
4.35%
3.80%
0.20%
146,770
Looks to have capped out with 13 increases in 18 months to sit at a 12 year high.
Remains relatively low and unchanged for 3 months at 3.8% - well below the RBA’s desired 4.5%.
The weakest quarterly result since Q3-2016, outside of periods impacted by COVID-19 related lockdowns.
Continuing to surge post the re-opening of international borders.
December 2023
December 2023
September 2023
June 2023
AUS Inflation
Exchange Rate AUD/USD
VIC Wage Growth
Melb. Median House Price
0.60%
0.68
1.50%
$909,000
Downward trend continued over the quarter, with the CPI rising over the 12 months to 4.1%.
Reached a 6 month high after falling to a low of US$0.62 in November.
Up 1.5% over the quarter, and 3.7% over the year.
A higher fall then the previous month with a 2.2% quarterly fall and 5.8% fall over 12 months.
December Quarter 2023
December 2023
September 2023
December 2023
VIC Avg. Weekly Earnings
VIC State Final Demand
VIC Unemployment
VIC Employment Participation
$1,832
0.42%
4.00%
67.50%
4th highest among all states and territories, slightly below national average.
Growth remains solid albeit down slightly, aided by record population growth for the state.
Flat over the month and remains at 12 month high of 4%.
Remained steady from last quarter, and is relatively high from an historical perspective.
May 2023
September 2023
December 2023
December 2023
Victorian Greenfield Market Report - Q4 2023
5
Development Sites
Victorian Greenfield Market Report - Q4 2023
The Return of the Superlot Sales Superlots have become focal points for developers seeking to unlock capital and for buyers seeking to tap into emerging opportunities within established communities. Recent sales success at Arramont Wollert, Atticus Woodstock, and other established land projects across metropolitan Melbourne and regional Victoria signals the resurgence of a thriving superlot market. Developers are increasingly turning to superlot sales which are strategically situated within these rapidly growing communities. “These smaller-scale development sites have become focal points for land developers seeking to unlock capital and for buyers seeking to tap into emerging opportunities within established communities,” notes Tim Hyland, National Strategy Manager, Transactions & Advisory at RPM Group. This shift responds to the challenges faced by lot sales struggling for momentum in Q4 – grappling with the economic factors that have influenced buyer behaviour.
Victorian Greenfield Market Report - Q4 2023
The recent surge in superlot sales is driven by two key factors. Firstly, developers are recognising the advantages of capitalising early in their projects. Selling a superlot enables the injection of substantial revenue; a strategic move crucial to navigating the complex financial landscape of large-scale property developments. “Superlot sales are significant in the current market, prompting developers to explore new avenues for financial traction,” explains Mr Hyland. Secondly, a more diverse range of buyers is entering the superlot market, aiming to cater to the needs of a growing population and position themselves for future growth. Commercial, retail, and medical operators are strategically establishing themselves, often ahead of major town centre developments. High-demand childcare providers are also seizing
Tim Hyland National Strategy Manager Transactions & Advisory
opportunities to meet critical service demands in rapidly growing areas. Referring to our Transactions & Advisory division’s recent sale of the Arramont superlot in Wollert, Mr Hyland notes its suitability for a new childcare development, addressing the critical demand for early learning services in the established Wollert community, where the majority of new land purchasers already have children.
As superlot sales continue their resurgence, developers closely monitoring these market shifts are best positioned to leverage super lot opportunities that will benefit both them and the wider communities.
Builders are also actively seeking bulk lot purchases or small-scale development sites with delayed settlement terms, positioning themselves for the upcoming housing boom. “Established estates and communities offer appealing prospects for builders, with the potential for price escalation over time – this can be a lucrative prospect for forward-thinking builders,” says Mr Hyland.
For more information on upcoming superlot sales, contact Tim Hyland or Zaynoun Melhem: tim@rpmgrp.com.au zaynoun@rpmgrp.com.au
7
Vacant Land Market
Victorian Greenfield Market Report - Q4 2023
8
Vacant Land Market Overview The market’s response to challenges was marked by the continuation of discounts and incentives to support sales activity.
There was a noticeable stabilisation in purchaser sentiment as we entered Q4 2023, aided by the pause in interest rate rises during the four months to October. However, this optimism was short-lived, with confidence shaken by an unexpectedly robust inflation reading in September, leading to the 13th interest rate rise since May 2022 in November. While this rate rise may have been necessary for other industries, it exacerbated the challenges within the property market marked by diminishing borrowing capacity (which had already declined by around 30% before the last rate rise). The November decision further intensified these challenges, compounding the already significant barriers to entry into the new home market. RPM Buyer Survey results following the HomeBuilder Grant show a shift in buyer demographic. The 35 to 49 age group now constitutes a higher proportion of purchasers compared to those aged 25 to 34 – marking a reversal of previous trends*. Seasonal impacts deepened this decline in demand with lot sales hitting an 11-year low in both November
Victorian Greenfield Market Report - Q4 2023
and December. We also saw this across Melbourne and Geelong growth areas, which fell by 12% (to 1,770 lots) in Q4 2023 compared to the same period in 2022. This was the lowest sales volume for a Q4 period since 2012. Additionally, the greenfield market faced increased competition from a burgeoning secondary land market with a surge in available re-sale lots where slower absorption rates and heightened stock levels are delaying the entry of new supply; this is seen in a 22% annual decline in releases to 1,452 lots. The market responded with the continuation of discounts and incentives to support sales activity. These incentives, ranging from 5% to 10% of the headline price, remain crucial in sustaining market momentum. Although lot prices appear stable, the 0.5% decline in Melbourne’s median lot price to $386,900 in Q4 can be attributed to a 1.1% reduction in median lot size to 350sqm, signaling a more significant correction when considering the net price paid by purchasers.
Lots Sold
Rod Anderson National Managing Director Communities
Median Lot Price
1,770
$386,900
Sales declined by 12% in an eleven year low.
Median price edged lower by 0.5% over qtr.
Q4 2023
Q4 2023
Trading Days of Lots Sold
Median Lot Size
186
350sqm
Avg. selling time has pushed out to more than 6 months.
Median size diminished by 1.1% over qtr & 2.0% over year.
Q4 2023
Q4 2023
* Over the two and a half years to 2023, 43% of buyers were aged 35 to 54 and 36% of buyers were aged 25 to 34. Over the nine years to FY2021, 33% of buyers were aged 35 to 54 and 47% of buyers were aged 25 to 34.
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Gross Lot Sales Breakdown Lot Sales by Price Bracket
% Contribution to Total Gross Lot Sales 56%
$375K>
53% 35% 10% 13%
$351K-$375K
10% 10% $326K-$350K
11% 15% 8%
$301K-$325K
9% 13% 16%
Casey
18%
Cardinia
4%
Hume
11%
Whittlesea
12%
Sunbury
5%
Mitchell
2%
Wyndham
16%
Melton
24%
Moorabool
1%
Greater Geelong
8%
14%
<$300K
25% 0%
10% Q2 2023
Q2 2022
Victorian Greenfield Market Report - Q4 2023
20%
30%
40%
50%
60%
Q2 2021
10
Melbourne and Geelong Buyer Surveys RPM surveys every buyer on our clients estates in the greenfield market. The following illustrates demographic and purchase intent amongst all purchasers over Q4 2023. For a detailed analysis of any corridor, LGA, or suburb in Victoria, please contact our Research, Data & Insights team.
Lot Size
Owner Occupier Type First Home Second Home Third Home Fourth Home Other
58% 27% 6% 3% 5%
Purchase Type Townhome House & Land Land Only
6% 18% 76%
m.staedler@rpmgrp.com.au
>701sqm 676-700sqm 651-675sqm 626-650sqm 601-625sqm 576-600sqm 551-575sqm 526-550sqm 501-525sqm 476-500sqm 451-475sqm 426-450sqm 401-425sqm 376-400sqm 351-375sqm 326-350sqm 301-325sqm 276-300sqm 251-275sqm <250sqm
Owner Occupier vs. Investor 2% 0% 0% 0% 0% 0% 0% 2% 5% 19% 2% 6% 6% 10% 6% 16% 2% 2% 10% 15%
28% Investor
72% Owner Occupier
Size of Home (inc. Garage)
Household Type Group Household Single Couple Family
0% 5% 19% 76%
Country of Origin Australia India Philippines
Victorian Greenfield Market Report - Q4 2023
42% 21% 9%
Home & Land Budget >$950k $900-950k $850-900k $800-850k $750-800k $700-750k $650-700k $600-650k $550-600k $500-550k $450-500k $400-450k <$400k
7% 5% 8% 8% 12% 16% 11% 11% 12% 4% 3% 3% 3%
24% 29% 33% 11% 4%
>30 sqs 26-30 sqs 21-25 sqs 16-20 sqs <15 sqs
No. Storeys Considered Undecided Double Storey Single Storey
4% 42% 54%
11
Growth Corridor Snapshot BENDIGO Gross Lot Sales
43
Median Size (sqm)
350
New Lots Releases
Median Lot Price
15
$299k
Median Size (sqm)
New Lots Releases
WESTERN Gross Lot Sales
723
Median Size (sqm)
350
New Lots Releases
586
Median Lot Price
$365k
NORTHERN Gross Lot Sales
531
350
509
Median Lot Price
$378k
BALLARAT Gross Lot Sales
137
Median Size (sqm)
504
New Lots Releases
31
Median Lot Price
$310k
SOUTH EASTERN Gross Lot Sales
379
GEELONG Gross Lot Sales
137
Median Size (sqm)
400
Victorian Greenfield Market Report - Q4 2023
New Lots Releases
59
Median Size (sqm)
368
New Lots Releases
298
Median Lot Price
$437k
Median Lot Price
$394k
* Percentages expressed as change from Q3 2023 to Q4 2023
12
Wallan $310,000 Beveridge $337,000
What Does a 350sqm Lot Cost?
Kalkallo $367,000 Mickleham $410,500
Donnybrook $362,000
Craigieburn $410,000
Sunbury $361,000
Wollert $429,000
Mernda $389,000
Burnside $464,000 Bonnie Brook $396,000 Melton South $335,000
Aintree $402,000
Fraser Rise $400,000
Deanside $392,500
Strathtulloh $363,000 Weir Views $344,000 Tarneit $383,900 Manor Lakes $355,000 Mambourin $365,000
Truganina $402,100
Wyndham Vale $368,500 Werribee $371,000
Nar Nar Goon North $370,000 Lara $342,850
Officer $478,750
Cranbourne $468,000
Cranbourne East $427,000
Clyde North $417,500
Clyde $405,000
Victorian Greenfield Market Report - Q4 2023
Armstrong Creek $351,000
13
Western Corridor
Victorian Greenfield Market Report - Q4 2023
Pictured - Render of Harlow, Tarneit by SIG Group
14
Western Corridor - Buyer Activity Gross Lot Sales
Sales activity in the Western Growth Corridor saw a modest 5% decline, amounting to 723 lots. Despite this decrease, its share of total sales improved to 41%. The decline in sales activity was less pronounced compared to both the Northern and South East growth corridors. Notably, Melton’s Q4 performance contributed to this improvement, making it the only Melbourne growth area to experience growth – albeit from a long-term low base in the last quarter.
4,000
160
3,500
140
3,000
120
2,500
100
2,000
80
1,500
60
1,000
40
500
20
0
0
Dec-20
Wyndham
Victorian Greenfield Market Report - Q4 2023
Average Trading Days of Lots Sold
Mar-21
Melton
Jun-21
Sep-21
Moorabool
Dec-21
Mar-22
Jun-22
Average Trading Days
Sep-22
Dec-22
Mar-23
Jun-23
Sep-23
Dec-23
Source: RPM Research, Data & Insights
15
Western Corridor - Vacant Land Stock Number of Lots Added to Market 3,500
3,000
Amid weakened sales rates, new lot supply reduced as developers focused on absorbing existing stock on the market. In Q4, new supply saw a 4% decline, amounting to 586 new lot releases. Notably, Wyndham contributed significantly to this drop, with its new supply falling by 19%. In contrast to other growth corridors, stock returns in the Western growth corridor followed an upward trend in Q4, increasing by a further 14% to reach 262 lots.
2,500
2,000
1,500
1,000
500
0
Dec-20
Mar-21
New Stock Releases
Victorian Greenfield Market Report - Q4 2023
Jun-21
Sep-21
Dec-21
Stock Returned to Market
Mar-22
Jun-22
Sep-22
Dec-22
Mar-23
Jun-23
Sep-23
Dec-23
Source: RPM Research, Data & Insights
16
Western Corridor - Lot Price and Size Median Lot Price $450,000
400
$400,000
390
Median lot prices in the Western growth corridor saw a correction, with the overall median value declining by 5.2% to $365,000 – outperforming the North as the most affordable corridor in Melbourne (based on median lot prices) for the first time since Q2 2019.
$350,000
The median per square metre rate declined proportionally, aligning with the static median lot size of 350sqm.
$150,000
380
$300,000
370
$250,000 360 $200,000 350 340
$100,000 $50,000
330
$0
320
Dec-20
Median Lot Size
Victorian Greenfield Market Report - Q4 2023
Median Lot Size
Mar-21
Jun-21
Sep-21
Median Lot Price
Dec-21
Mar-22
Jun-22
Sep-22 Dec-22 Mar-23
Jun-23
Sep-23 Dec-23
Source: RPM Research, Data & Insights
17
Northern Corridor
Victorian Greenfield Market Report - Q4 2023
Pictured: Matilda, Donnybrook by Marantali Group
18
Northern Corridor - Buyer Activity Gross Lot Sales
Average Trading Days of Lots Sold
2,500
160 140
The Northern growth corridor saw a further reduction in its proportion of gross lot sales in Q4, declining to 30% - however, it remains above its long-term average. The overall sales activity contracted by 20% over the quarter to 531 lots, with the four sub-growth areas experiencing a quarterly decline in lot sales. Notably, among the growth corridors, the Northern maintains the lowest average time spent on market for lot sold, which slightly increased over the quarter to rest at 113 days.
2,000 120
80 1,000
60 40
500 20 0
Hume
Victorian Greenfield Market Report - Q4 2023
100
1,500
Dec-20
Mar-21
Whittlesea
Jun-21
Sunbury
Sep-21
Dec-21
Mitchell
Mar-22
Jun-22
Sep-22
Average Trading Days
Dec-22
Mar-23
Jun-23
Sep-23
Dec-23
0
Source: RPM Research, Data & Insights
19
Northern Corridor - Vacant Land Stock Number of Lots 2,500
New supply fell by a more marginal 2% to 509 lots, aligning more closely with lot absorption dynamics. Lot release activity exhibited mixed trends, with double-digit growth rates in Whittlesea and Sunbury, while declining in Hume and Mitchell.
2,000
Lot returns to the market decreased by a more substantial 27% to 121 lots, marking the lowest quarterly figure since Q2 2022.
1,000
1,500
500
0
Dec-20
Mar-21
New Stock Releases
Victorian Greenfield Market Report - Q4 2023
Jun-21
Sep-21
Dec-21
Stock Returned to Market
Mar-22
Jun-22
Sep-22
Dec-22
Mar-23
Jun-23
Sep-23
Dec-23
Source: RPM Research, Data & Insights
20
Northern Corridor - Lot Price and Size Median Lot Price
Despite a moderate 2.4% increase, bringing its median lot price to $378,900, the Northern growth corridor lost its position as the most affordable new growth region to the West. All four sub-regions saw growth in median lot prices, ranging from 0.3% in Sunbury to 4.9% in Whittlesea. The overall median lot size remained unchanged at 350sqm, highlighting a notable size difference between lots sold in Hume and Whittlesea compared to Sunbury and Mitchell.
$400,000
400
$350,000
390
$300,000
380
$250,000
370
$200,000
360
$150,000
350
$100,000
340
$50,000
330
$0
320
Dec-20
Median Lot Size
Victorian Greenfield Market Report - Q4 2023
Median Lot Size
Mar-21
Jun-21
Sep-21
Median Lot Price
Dec-21
Mar-22
Jun-22
Sep-22 Dec-22 Mar-23
Jun-23
Sep-23 Dec-23
Source: RPM Research, Data & Insights
21
South East Corridor
Victorian Greenfield Market Report - Q4 2023
Pictured: Eliston, Clyde Parklands
22
South East Corridor - Buyer Activity Gross Lot Sales
Over Q4, the South East growth corridor saw a 17% decline in gross sales, dropping to 379 lots, constituting 21% of total sales activity. The decline in lot sales was more pronounced in Cardinia compared to Casey. Within Melbourne, the South East retains the longest average time spent on the market for lots sold, extending to approximately six months in Q4.
1,800
180
1,600
160
1,400
140
1,200
120
1,000
100
800
80
600
60
400
40
200
20
0
0
Dec-20
Casey
Victorian Greenfield Market Report - Q4 2023
Average Trading Days of Lots Sold
Mar-21
Cardinia
Jun-21
Sep-21
Dec-21
Average Trading Days
Mar-22
Jun-22
Sep-22
Dec-22
Mar-23
Jun-23
Sep-23
Dec-23
Source: RPM Research, Data & Insights
23
South East Corridor - Vacant Land Stock Number of Lots 1,800 1,600
New supply declined in line with the fall in sales activity, falling by 14% to 298 lots. This decline was driven by a 50% reduction in lot releases in Cardinia during Q4, contrasting with a modest 3% increase in sew supply in Casey. Stock returns to the market improved, reaching 132 lots, which was 29% below Q3.
1,400 1,200 1,000 800 600 400 200 0
Dec-20
Mar-21
New Stock Releases
Victorian Greenfield Market Report - Q4 2023
Jun-21
Sep-21
Dec-21
Stock Returned to Market
Mar-22
Jun-22
Sep-22
Dec-22
Mar-23
Jun-23
Sep-23
Dec-23
Source: RPM Research, Data & Insights
24
South East Corridor - Lot Price and Size Median Lot Price
Median Lot Size
$500,000
400
$450,000
The South East’s median lot price saw a marginal 0.6% increase, reaching $437,500. This reflects a more substantial 9% escalation compared to the same quarter last year, marking the largest annual growth rate. Despite this, the growth corridor maintained its status as the least affordable new home market. Affordability concerns likely contributed to a nearly 2% reduction in the median lot size; now at 368qm.
390
$400,000 $350,000
380
$300,000 $250,000
370
$200,000 360
$150,000 $100,000
350
$50,000 $0
Dec-20
Median Lot Size
Victorian Greenfield Market Report - Q4 2023
Mar-21
Jun-21
Sep-21
Median Lot Price
Dec-21
Mar-22
Jun-22
Sep-22 Dec-22 Mar-23
Jun-23
Sep-23 Dec-23
340
Source: RPM Research, Data & Insights
25
Geelong Corridor
Victorian Greenfield Market Report - Q4 2023
26
Geelong Corridor - Buyer Activity Gross Lot Sales
Average Trading Days of Lots Sold
1,200
200 180
1,000
Sales activity in the Geelong growth corridor remains near long-term lows, with the 137 gross lot sales of Q4 mirroring the previous two quarters. Weak demand for new homes has prolonged the average time between release and sale to over seven months, marking the longest period among all growth corridors.
160 140
800
120 600
100 80
400
60 40
200
20 0
Dec-20
Mar-21
Armstrong Creek
Victorian Greenfield Market Report - Q4 2023
Jun-21
Bellarine
Sep-21 Geelong
Dec-21
Mar-22
Lara
Torquay
Jun-22
Sep-22
Dec-22
Average Trading Days
Mar-23
Jun-23
Sep-23
Dec-23
0
Source: RPM Research, Data & Insights
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Geelong Corridor - Vacant Land Stock Number of Lots 1,000 900
Geelong growth corridor’s new supply dropped further to just 59 lots, marking a 6% decline from last quarter’s decade low. Notably, Geelong is the only growth corridor where stock returns to the market exceeded lot releases, despite a 19% decrease in stock returns over the quarter to 79 lots.
800 700 600 500 400 300 200 100 0
Dec-20
Mar-21
New Stock Releases
Victorian Greenfield Market Report - Q4 2023
Jun-21
Sep-21
Dec-21
Stock Returned to Market
Mar-22
Jun-22
Sep-22
Dec-22
Mar-23
Jun-23
Sep-23
Dec-23
Source: RPM Research, Data & Insights
28
Geelong Corridor - Lot Price and Size Median Lot Price
Median Lot Size
$410,000
500 450
$390,000
Fragile new home demand has likely impacted Geelong growth corridor’s median price, which corrected by 1.8% in Q4, reaching $394,000. With the median lot size remaining steady at 400sqm, it suggests a slight affordability improvement in price points for vacant lots; as the median per square metre rate also dropped below the $1,000 mark.
400 $370,000 350 $350,000
300 250
$330,000
200
$310,000
150 $290,000 100 $270,000
$250,000
50
Dec-20
Median Lot Size
Victorian Greenfield Market Report - Q4 2023
Mar-21
Jun-21
Sep-21
Median Lot Price
Dec-21
Mar-22
Jun-22
Sep-22 Dec-22 Mar-23
Jun-23
Sep-23 Dec-23
0
Source: RPM Research, Data & Insights
29
Regional Land
Victorian Greenfield Market Report - Q4 2023
30
Regional Land - Market Overview The Ballarat and Bendigo regions maintain some affordability advantage compared to the Metropolitan greenfield markets. The regional market continued to fluctuate in Q4 2023, initially showing improvements in Q2 due to developer-led incentives, followed by a return to a depressed state in Q3. However, Q4 did defy expectations of a subdued festive season market, exhibiting increased sales activity in both the Ballarat and Bendigo regions.
Victorian Greenfield Market Report - Q4 2023
Despite this modest gain, these regions maintain some affordability advantage compared to the Metropolitan greenfield markets. The regional established housing market has remained relatively stable, showing a 1.7% gain over the quarter and only a modest 0.7% fall over the year. This contrasts with Metropolitan Melbourne, which saw greater declines of 2.2% and 10.6% respectively. The combination of a tight lending environment and elevated construction costs (fuelled by labour shortages) means that affordability remains a highly competitive factor for the new home market. The industry has adapted to these challenges with the introduction, and now the continuation, of incentives and rebates to remain competitive.
31
Ballarat Corridor
Victorian Greenfield Market Report - Q4 2023
32
Ballarat Corridor - Buyer Activity Gross Lot Sales
Despite the traditionally subdued market typical of the festive season, Q4 saw 103 gross sales. This marks a notable 14% (13 sales) increase from Q3 and a more modest 8% (eight sales) rise from Q4 2022. The modest uptick can be attributed to the extended promotional activities offering discounted titled lots leading up to Christmas. New lot releases stand in contrast to the sales figures with a sharp reduction since the HomeBuilder Grant; falling from 464 lots in Q2 2021 to 31 lots this quarter. This latest quarterly release marks three of four quarters with less than 100 lot releases, indicating a developer focus on lot delivery over sales transactions throughout 2023. This decline in new releases coincided with a marginal increase in cancellations, with an average of 58 lots per quarter in 2023, up from 47 lots per quarter in 2022. As a result, the total inventory available on the market has steadily grown through the year, reaching 565 lots by the end of Q4 2023.
500
200
450
180
400
160
350
140
300
120
250
100
200
80
150
60
100
40
50
20
0
0
Dec-20
West Region
Victorian Greenfield Market Report - Q4 2023
Average Trading Days of Lots Sold
Mar-21
Jun-21
North Region
Sep-21
Dec-21
South Region
Mar-22
East Region
Jun-22
Sep-22
Dec-22
Average Trading Days
Mar-23
Jun-23
Sep-23
Dec-23
Source: RPM Research, Data & Insights
33
Ballarat Corridor - Vacant Land Stock Lots remaining at End of Quarter
The stock remaining at the end of Q4 2023 reduced by 3% (13 lots) to 462 lots. This marks the first reduction since Q4 2021, with stock previously increasing quarterly from 161 lots in Q4 2021 to 475 lots in Q3 2023. Despite this reduction, the stock overhang remains elevated.
500 450 400 350 300 250 200 150 100 50 0 Dec-20
Mar-21
Stock Overhang
Victorian Greenfield Market Report - Q4 2023
Jun-21
Sep-21
Dec-21
Mar-22
Jun-22
Sep-22
Dec-22
Mar-23
Jun-23
Sep-23
Dec-23
Source: RPM Research, Data & Insights
34
Ballarat Corridor - Lot Price and Size Median Lot Price
After maintaining an elevated $315,000 mark for nearly a year to Q1 2023, the increasing strain on households began affecting both sales activity and prices. Over H1 2023, the median lot price fell by 5% ($16,000) to settle at $300,000 – the lowest since Q4 2021. While prices rebounded by 3% ($10,000) to $310,000 in Q4, it’s important to note that this increase corresponds to a 12% larger lot size compared to the last quarter, measuring at 448sqm. This indicates that developers are discounting the larger lots in the market, particularly titled lots, which traditionally take longer to sell in a market navigating affordability challenges. This is reinforced by the price per square metre rate dropping by 8% ($56 over the quarter) to another low not seen since Q4 2021. Stock remaining at the end of the quarter recorded a lot price of $313,000, which is $3,000 higher than the sold stock. This, together with the fact that the remaining lots were a larger 504sqm (compared to the 448sqm of sold lots) underscores the current market’s sensitivity to pricing dynamics.
600
$350,000
$300,000
500
$250,000 400 $200,000 300 $150,000 200 $100,000 100
$50,000
$0
Dec-20
Median Lot Size
Victorian Greenfield Market Report - Q4 2023
Median Lot Size
Mar-21
Jun-21
Sep-21
Median Lot Price
Dec-21
Mar-22
Jun-22
Sep-22
Dec-22
Mar-23
Jun-23
Sep-23 Dec-23
0
Source: RPM Research, Data & Insights
35
Bendigo Corridor
Victorian Greenfield Market Report - Q4 2023
36
Bendigo Corridor - Buyer Activity Gross Lot Sales
The Bendigo market also defied seasonal dynamics with a notable 26% increase (+9 lots), recording 43 gross lot sales in Q4. This follows four quarter-on-quarter falls to Q2 2023, and Q3’s modest gain in sales. However, it is important to note that this still reflects a 26% reduction (-15 sales) compared to Q4 2022, making it the third-lowest sales quarter since Q3 2021. Another positive is that only 15 lots were returned to the market over Q4 2023. This is a 54% reduction over the quarter and aligns with the average observed in 2022. Given the festive season, only 15 lots were released in Q4, consistent with the previous month. In fact, 2023 recorded modest new stock releases with only 81 new lots entering the market through the year. For comparison, 459 lots were released over 2022.
300
180 160
250 140 200
120 100
150 80 60
100
40 50 20 0
Dec-20
North Region
Victorian Greenfield Market Report - Q4 2023
Average Trading Days of Lots Sold
Mar-21
Jun-21
East Region
Sep-21
Dec-21
South Region
Mar-22
West Region
Jun-22
Sep-22
Dec-22
Average Trading Days
Mar-23
Jun-23
Sep-23
Dec-23
0
Source: RPM Research, Data & Insights
37
Bendigo Corridor - Vacant Land Stock Lots remaining at End of Quarter
While there has only been a modest number of stock releases over the year, the notable decline in sales activity (compared to the HomeBuilder period) has led to quarter-on-quarter gains in stock remaining since Q1 2021. After falling to just 26 lots, there is now a total of 225 lots on market – a high not seen since Q1 2020.
250
200
150
100
50
0
Dec-20
Mar-21
Stock Overhang
Victorian Greenfield Market Report - Q4 2023
Jun-21
Sep-21
Dec-21
Mar-22
Jun-22
Sep-22
Dec-22
Mar-23
Jun-23
Sep-23
Dec-23
Source: RPM Research, Data & Insights
38
Bendigo Corridor - Lot Price and Size Median Lot Price
Despite the low level of activity, Bendigo saw a notable 8% increase (+$21,500) in pricing, bringing the overall price to $299,000 and marking a 13% gain ($34,500) from Q4 2022. This is the fifth consecutive quarterly gain in price growth, intensifying affordability concerns as the region hits its highest price on record. Lot sizes also expanded over the 15-month period of price growth. Q4 saw an additional 10sqm added, resulting in a median lot size of 640sqm. This latest median is a significant 43% gain (+192sqm) from the same time last year with the increased size attributed to western sales where the median lot size is 866sqm. While both price and size have increased, price growth overshadowed lot size with a subsequent 6% gain (+$27) in the price per square metre rate.
$350,000
700
$300,000
600
$250,000
500
$200,000
400
$150,000
300
$100,000
200
$50,000
100
$0
Dec-20
Median Lot Size
Victorian Greenfield Market Report - Q4 2023
Median Lot Size
Mar-21
Jun-21
Sep-21
Median Lot Price
Dec-21
Mar-22
Jun-22
Sep-22 Dec-22 Mar-23
Jun-23
Sep-23 Dec-23
0
Source: RPM Research, Data & Insights
39
Regional Land - Outlook The demand for regional change will persist but affordability will play a more pivotal role. The demand for regional change will persist stronger than pre-pandemic levels. However, this will largely depend on the regions offering suitable lots with a focus on pricing and slightly smaller sizes. Offering more compact lots, including those suitable for townhomes, presents an opportunity for budget-conscious buyers to enter the market. At the same time, the availability of larger lifestyle lots that caters to other buyer groups will meet the needs of a broader buyer pool. While the lending environment is expected to remain stable for the first half of the year (with rate cuts anticipated for the second half), significant improvements in activity will take some time to flow through. Nevertheless, active buyers are likely to have considerable negotiating power given the elevated level of stock on market and the continuation of discounts and incentives available to them.
Victorian Greenfield Market Report - Q4 2023
40
Secondary Land Market
Victorian Greenfield Market Report - Q4 2023
41
Secondary Land Market Competition between the primary and secondary land markets is expected to remain with developers continuing to offer discounts and incentives.
Although residential construction costs eased and interest rate rises were infrequent in H2 2023, the Melbourne and Geelong new home markets were still plagued by constrained affordability and weak sentiment throughout Q4. November’s rate rise marked a cumulative 425 basis point increase since May 2022, causing many households to lose around one-third of their borrowing capacity. This, coupled with elevated construction costs and high cost-ofliving pressures, led many buyers to reassess their financial capacity to build a new home. This trend impacted owner occupiers unable to settle (including first home buyers) and investors deterred by a challenging lending environment. As a result, we recorded more purchasers reselling their vacant lot rather than proceeding to construction. Analysis of the market in Q4 revealed a 28% increase in the number of advertised resales over a six-month period to 2,835 lots. This was 8% more than the previous high of 2,637 lots in December 2019.
Victorian Greenfield Market Report - Q4 2023
Around 84% of resale lots on the market in December were titled; with this proportion surpassing 80% in all growth areas but Moorabool. Continuing from previous periods, Wyndham contained the largest secondary market with 781 resale lots, followed by Melton’s 542 resale lots. The volume of resale lots surged by 140% in Cardinia, 89% in Moorabool, and 82% in Casey. The average price of lots across Melbourne and Geelong growth areas on the secondary land market was $415,797 – we should note that although this was 3.6% more expensive than the primary market lots, it did correspond to a 15% larger lot. The secondary land market value for a 350sqm lot was $367,339 in December, which is 5.6% more affordable than the corresponding value of $388,929 for the primary market. This, coupled with limited sales activity has led developers to offer more competitive pricing strategies, including sizeable discounts and incentives.
Rod Anderson National Managing Director Communities
Slowly but surely, new home demand is anticipated to pick up through 2024. Inflation has slowed more than expected since late 2023, most signs are pointing to interest rates having peaked, and a reduction expected in H2 2024. Although there will be minimal relief from affordability pressures in the first half of the year, the stage 3 tax cuts could provide some relief in the second half. As a result, the volume of resale lots on the secondary market is forecast to remain relatively high by June 2024. Competition between the primary and secondary land markets is expected to remain intense, with developers continuing to offer significant savings to attract buyers.
42
Greenfield Townhomes
Victorian Greenfield Market Report - Q4 2023
Pictured: Burbank Urban, Premier Release at Eliston East Quarter
43
Greenfield Townhomes Townhomes and smaller lots offer the dream of homeownership without the price tag of a detached house.
Homeownership at an achievable price point The RBA lifted interest rates 13 times between May 2022 and last November. The cumulative 425 basis point increase was the most in three decades and has significantly lifted monthly repayment costs. These increases didn’t hamper property prices however, which remained resilient; moderating slightly in 2023 but remaining above 2020 levels. Despite elevated costs, local demand and record immigration have underscored the need for increased housing supply, with townhomes and smaller lots offering the dream of homeownership without the price tag of a detached house.
Luke Kelly National Managing Director Project Marketing
Purchase Price Capacity $2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$0 April 2022
Victorian Greenfield Market Report - Q4 2023
$80,000
$100,000
November 2023
$120,000
$160,000
$200,000
$240,000
$280,000
Source: RPM Research Data & Insights
44
Greenfield Townhomes (continued) Striking a balance between affordability and homeownership
Minimum Repayments Per Month Based on Median Housing Costs
During the RBA’s aggressive tightening monetary policy, households across all income bands lost around one-third of their borrowing capacity – stressing the need for affordable dwelling options.
$6,000
Servicing costs rose aggressively from early 2022, reaching a $1,300 monthly increase for the average Greater Melbourne house mortgage repayments by the end of 2022 – with the most recent figures showing a typical house mortgage has surpassed the $5,200 per month mark. House and land package mortgages surged by more than 180% between December 2021 and December 2023, reaching nearly $4,700 per month*. On the other hand, average townhome repayments are available at a more manageable $3,100 per month. This means an average house mortgage requires a yearly income of $208,900, a house and land package requires $187,300, while an average townhome mortgage requires $125,800 – only the last option falls within the moderate income band for families as of June 2023.
Minimum Monthly Payment
Dec-21
Dec-22
Dec-23
House
$3,524
$4,847
$5,223
Unit**
$1,353
$2,585
$3,146
House and Land Package
$1,646
$3,568
$4,682
$5,000
$4,000
$3,000
$2,000
$1,000
$0
Unit
$44,531
$44,621
$44,713
New Home & Land Package
$44,805
House
$44,896
$44,986
$45,078
$45,170
$45,261
Source: RPM Research Data & Insights
* This reflects the increase in build cost and appreciating land price across Melbourne. ** The term ‘units’ references both townhomes and apartments.
Victorian Greenfield Market Report - Q4 2023
45
Greenfield Townhomes (continued) Greater Melbourne approves 9,000+ new townhomes in 2023 Rank
LGA
CY 2023 YTD Townhome Approvals
1
Casey
878
2
Melton
489
3
Whittlesea
482
4
Darebin
432
5
Moonee Valley
404
6
Hume
384
7
Brimbank
368
8
Hobsons Bay
349
9
Wyndham
338
10
Greater Geelong
320
Source: ABS Building Approvals
Victorian Greenfield Market Report - Q4 2023
46
Victorian Greenfield Market Outlook Long-term high population growth is underpinning burgeoning pent-up housing demand, driven by newly arrived migrants and the return of cautious buyers.
2024 holds potential for an uplift in purchaser sentiment thanks to the improving outlook for inflation and, in turn, interest rates. The November interest rate rise restrained household spending, leading to Q4’s annual CPI growth reducing from 4.6% to 4.1% - the lowest in two years and below consensus expectations. The RBA’s February decision to hold interest rates has bolstered belief that the current tightening monetary policy cycle is ending, giving prospective purchasers greater clarity and stability on borrowing capacities and repayments.
Victorian Greenfield Market Report - Q4 2023
These positive signals must be tempered against the 2023 challenges expected to linger in the short term. The secondary land market’s increasing supply of vacant lots will sustain fierce competition for purchaser demand. Additionally, the relative affordability of new homes compared to established dwellings deepened over the quarter, with Melbourne’s land-to-house ratio deteriorating to 43% (surpassing the 35% equilibrium ratio). This intensified broader affordability concerns arising from the 13 interest rate rises and elevated construction costs, serving as a significant barrier to entry into growth area markets.
The above will prompt the continuation of enticing discounts and incentives by greenfield developers. These incentives will also advance the turnover of a growing volume of titled lots (around 28% of 4,900 lots) across Melbourne and Geelong as of December. Another 35% of total stock is anticipated to title in the first half of 2024. Long-term high population growth is underpinning burgeoning pent-up housing demand, driven by recently arrived migrants and the return of cautious buyers who had stalled their purchasing decision awaiting price certainty. Despite this need for approximately 80,000 new homes to keep pace with demand, the 70/30 plan is underway; the greenfield sector is prime to meet the future housing needs yet the focus on infill persists.
Michael Staedler General Manager Research, Data & Insights
Looking ahead, the stage 3 tax cuts set to be implemented from July 2024 will benefit low- and middle-income households by boosting borrowing capacity by around 5%. Additionally, a cycle of interest rate reductions forecast to begin in late 2024 (supported by a slowdown in inflation growth) should provide additional relief. As buying conditions become more favourable in the year ahead, the new home market is poised to capture increased buyer activity.
47
Our Team Research, Data & Insights Michael Staedler
General Manager Research, Data & Insights m.steadler@rpmgrp.com.au
Andrew Raponi
Research Manager a.raponi@rpmgrp.com.au
Laurence Rao
Simon Brinkman
Peter Grant
Senior Research Analyst - VIC laurence@rpmgrp.com.au
Senior Research Analyst - QLD simon@rpmgrp.com.au
Executive, Sales and Marketing Leadership Gary Dunne
Luke Kelly
Rod Anderson
National Managing Director Project Marketing luke@rpmgrp.com.au
National Managing Director Communities rod@rpmgrp.com.au
Tim Hyland
Michael Vilar
Greg Rankin
Imogene Schaefer
Jane Ormerod
Chief Executive Officer gary@rpmgrp.com.au
National Strategy Manager Transactions & Advisory tim@rpmgrp.com.au
General Manager Marketing imogene@rpmgrp.com.au
Victorian Greenfield Market Report - Q4 2023
General Manager Medium Density michaelv@rpmgrp.com.au
General Manager Communities gregr@rpmgrp.com.au
National Managing Director Business Development peter@rpmgrp.com.au
Johnathon Driessen
General Manager Communities johnathon@rpmgrp.com.au
Head of Property Management jane@rpmgrp.com.au
48
Unlocking Australia’s Property Landscape For detailed insights or custom reporting, contact the team at: contactus@rpmgrp.com.au
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