Price Melbourne land at its true value and buyers will come: Australand

Melbourne house and-land-developers should focus on offering land at its true value surrounded by the right mix of community amenities and drop their rebates and incentives, says Australand’s head of residential developments in Victoria.

The developer has set up a new website – www.righttimetobuy.com.au – to inform prospective buyers that rebates and incentives do not add any real value and while they appear to lower the price, buyers need to “understand that banks and financial institutions factor all of this into their valuation which could ultimately jeopardise your loan application”.

Rob Pradolin, Australand general manager for residential in Victoria, says everyone who buys land that comes with an incentive is paying an inflated face price, meaning they are paying too much in stamp duty.

“As an example someone buying a block of land for $200,000 plus receives a free car worth approximately $30,000 should be paying stamp duty on only $170,000,” he says.

In addition, the unsuspecting buyer might go to the bank, having bought land for $200,000 to seek financing and run into difficulties.

“The bank will see that the buyer has a received a free gift or offer, and the buyer may need to find money to make up the difference between the valuation and the list price,” he says.

Pradolin says people should buy "on value".

He says developers need to acknowledge that the “market price of land has changed”.

“There has been a re-adjustment in Melbourne land prices. Even if there is a spike in demand there will be no dramatic increase in pricing.

“Let’s make it simple for the consumer and start selling value again not who has the biggest discount.

“The legitimate use of the rebate from a business perspective has been lost,” he says.

Pradolin says all developers have used rebates in the past, but when the market was operating normally and with a different purpose in mind such as “when you need to achieve a certain volume target that’s over and above what a normal market would deliver".

“We have use rebates to provide an incentive to a buyer to buy earlier than they would normally. Rebates allow you to adjust the net price and not affect underlying value of the property,” he says.

But he says now he says “everyone” is offering rebates, and “all the time” as a marketing tool, to attract buyers based on “how much incentive you can offer”.

“You lose what should be the real fundamental reason for buying – location, location, location – and the amenity and surroundings you offer in the development."

Pradolin says Australand has found that people have a degree of confidence when land is priced under $200,000.

A recent Colliers International report found the median Melbourne land prices fell by 9% from $215,000 to $205,000 over the first six months of 2012.

Sales of land on Melbourne’s fringes have been in decline since the second half of 2009, falling from 16,000 sales in 2010 to just 6,000 for the first six months of 2012.

Colliers International forecasts only modest growth ahead for the Melbourne residential land market.