Melbourne land prices rose in double digits in 2016
The cost of purchasing a plot of land in Melbourne rose 12.4 percent in 2016, buoyed by low interest rates, strong auction clearance rates and population growth, with the trend expected to continue this year.
The latest figures from project marketers red23 add to the strength of the Melbourne property market where house prices surged 15 per cent in 2016 ( CoreLogic), says a recent article in the Australian Financial Review.
Across the 143 active housing projects tracked by red23, the Melbourne median lot price rose to just under $240,000, though buyers were compensated with slightly bigger blocks of land, with the median lot size rising from 420 to 448 square metres.
Explaining the surge in land prices, Red23's head of research Andrew Perkins was quoted by the AFR as saying, "In 2016, we saw interest rates at an all‐time low, the strongest auction clearance rates since 2009, continued strong population growth, affordability relatively sound in comparison to Sydney and confidence levels stable.
A Melbourne lot is still 40 percent cheaper on average than a Sydney lot. The October HIA-CoreLogic Residential Land Report recorded a Sydney median lot price of $420,000 for a 450 sq m block.
"This suggests that all things being equal, 2017 will be much the same [for price growth]," he added.
Factoring in the cost of building, a new three-bedroom home within 25 kilometres of the Melbourne CBD can still be bought for under $350,000. In Sydney's outer west, a new three-bedroom home will cost around $600,000.
According to red23, lot price growth was strongest in Wyndham in the south-west, home to the more established growth suburbs like Point Cook and Williams Landing, where lot prices soared 28 per cent to $270,000 and weakest at just 3.8 per cent in Hume in the north and Melton in the west.
Strong buyer demand was also a key factor in rising lot prices, with the Victorian Planning Authority reporting a record 22,000 lot sales in the year to September – Melbourne is home to the country's fastest selling housing estate, the 7000-lot Woodlea estate at Rockbank in the west being developed by Mirvac and VIP Properties.
The strong rise in lot prices and record demand for new housing has seen developers pay huge sums of money for land in the outer suburbs.