MELBOURNE LAND MARKET UPDATE APRIL 2021
Despite the most challenging year for the development industry in living memory due to COVID-19 impacts, the Melbourne housing market demonstrated tremendous resilience to register strong momentum across the December quarter once Stage 4 lockdown were eased.
• The resilience of the Melbourne market is underscored with the out-performance of the land sector in the second half of 2020, with lot sales up 83% to register record monthly sales in the December quarter, of 1,856 per month.
• The outlook for the Melbourne new dwelling market is positive for 2021.
LAND MARKET ANALYSIS
• The Melbourne land market recorded an 83% increase in annual lot sales in 2020 to record 15,030 sales, with the December quarter driving much of the recovery with an average of 1,857 sales per month, a level not achieved since the peak of the current cycle in mid-2017.
• The land market performance for 2020 represented a robust correction from the significant under performance of 2019 when 8,200 lots were sold. The scale of unmet and stored demand in the market came back in full force in the December quarter when the second COVID-19 metropolitan-wide lockdown was finally lifted.
Developers responded to the strong demand profile by releasing 5,230 lots in the December quarter, up 53% from the pre-COVID impacted March Quarter, and the highest lot release quantum since the September 2017.
• Clearance levels improved across the year to help clear a build-up of unsold inventory, to close the year with just 2.1 months worth of stock left – below the ideal supply-demand benchmark of 3-5 months trading months of supply.
With expressed demand currently high, there has been a rapid sell out of a number of estates. This pressure on the supply line will need to be addressed.
MEDIAN LAND PRICE
• The December 2020 quarter median lot price was $315,000 which represented 42% of the established market median house price of $750,000 (CoreLogic) for Greater Melbourne (as at December 2020).
This is aligned with the long run average of 42% of the median house price (across 2009-2019) indicating lot pricing is in line with historical norms – in both absolute & relative terms.
MEDIAN LAND SIZE
Melbourne’s median land lot size dropped to 390sqm in 2020 which reflected a 1.3% drop from 2019 and a continuation of the on-going lot size reduction trend witnessed across Melbourne’s growth corridors since 2009.
• The December quarter saw the median lot size fall to 384 sqm which helped deliver an annual land rate of $819 per square metre.