Melbourne land price falls for second consecutive quarter

The median price of Melbourne land has fallen for the second consecutive quarter, down 2.5% to $220,000, as supply levels reach their highest point since 2008, according to research by Oliver Hume.

In the March quarter, Melbourne land prices fell by 0.3% (or $750) to $225,000.

Based on the current rate of project sales, 2,250 Melbourne lots are available for sale equating to 3.4 months of supply. Six months’ supply is considered to be the industry benchmark, but that was last experienced in the September quarter of 2006.

The Olive Hume June quarter house-and-land package index shows a median house-and-land package cost of $457,209, up 2.8% since the start of the year.

However, land, which peaked at 51% of the package price in the December quarter 2010, has now slipped back to around 48%.

In contrast, the median building permit value has increased by 8.4% or $12,600 since the start of the year, to $237,209.

This trend contradicts wider market sentiment, which suggests that in the current climate purchasers are spending more on land than on houses.

While median lot size in the first stage of each new project in the June quarter increased by about 6.6% to 468 square metres the median house size median increased by about 8% to 250 square metres.

The City of Wyndham, which has the highest median house-and-land package at over $515,000, is also where the biggest houses are being built in relation to the land size.

Houses in Wyndham are being built on 55% of the block at a median permit price of $284,000.

Residential developments in Point Cook account for one-third of all dwelling growth in the City of Wyndham over the six months to June 2011, or about 730 dwellings.

Realestate.com.au lists more than 500 blocks of land up for sale in Wyndham, with prices ranging from $340,000 for a 500-square-metre block to $650,000 for a 626-square-metre block.

According to Oliver Hume, Melbourne has most likely reached the peak of the current land-price cycle, with the decline in first-home buyers a key factor.

First-home buyer activity over the last six months has declined from around 70% to around 45% of all buyers, with a greater reliance on upgrading buyers to underpin sales.

“However, this market segment is subject to the vagaries of the established housing market, where auction clearance rates are declining and are now worse than during the global financial crisis and in line with levels last experienced in 2004,” the report says.

The most affordable municipality is Cardinia, with a house-and-land package median of $393,725. It is the only municipality with a median below $400,000.