First homer buyers and investors jumping on Melbourne land market opportunities: RPM Real Estate

Increasing sales volumes and moderating prices indicate buyers are seeing ‘fair value’ in Melbourne’s land market compared to runaway price growth in the established market, according to RPM Real Estate Group's latest Residential Market Review.

RPM, Victoria’s biggest land sales agency found in their Q4 report that not only are first home buyers seeing better value in Melbourne’s house and land market given moderating prices (while values in established housing continue to rise), but investors too.

Investors were the missing ingredient throughout most of last year, but RPM’s Q4 report reveals investors are seeing increasing opportunity in Melbourne’s greenfield market.

RPM saw a jump from a share of 24% of all purchases to 37% in the December quarter.

For the December quarter total lot sales increased 17 per cent to 3,185 lots from the previous quarter.

November recorded the eighth straight month of sales growth.

Click here to enlarge:

(Source: RPM Real Estate Group)

In the December quarter, other dwelling approvals jumped 78 per cent to 7,284 from the September quarter and 21 per cent compared to the same period a year ago (albeit it came off a record low).

The most substantial increase occurred in apartments, which rose 149 per cent over the quarter and 69 per cent from December 2018, although this sector is coming off a long term low.

The improved December quarter results have helped ease the rolling annual falls, with the townhouse market down 24 per cent and the apartment market down 18 per cent over the past year when compared to the same period a year earlier.

In the development site market, the quarter marked a pronounced turnaround resulting from pent up demand from developers and landowners who held back their properties for most of 2019 until they saw more stable market conditions where their values could again be supported.

Stockland’s acquisition of a large-scale site in Donnybrook Rd for more than $100 million signified a big deal by a big player, and gave other local developers confidence to invest, resulting in deal flows in the back half of the year in excess of $350 million.

In the inner and mid-ring apartment and townhouse market, Mr Kelly said while tentative positive approval numbers provide cautious optimism, the mismatch between supply and demand is still a key challenge.

“New project activity going through the pipeline is vital given once supply is absorbed there will need to be readily available stock to meet demand, otherwise a shortage will occur, putting pressure on vacancy rates, rents and prices overall,” he said.

Melbourne’s median lot price declined 2.1 per cent to $308,900, partly due to a reasonable amount of unsold or overhang stock on the market.