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Melbourne land crisis deepens as median residential lot price hits $346,000

by Larry Schlesinger

The cost of land to build a new house in Melbourne’s outer suburbs is now just shy of $350,000. – Pat Scala

Rampant lot price growth in Melbourne’s outer suburbs is showing no sign of slowing down with the latest figures putting the median lot price at almost $350,000 – a gain of nearly $100,000 or 39 per cent in 12 months.
The surge in pricing, which is being driven by strong population growth, inadequate levels of new housing supply, planning bottlenecks, delays in getting key infrastructure into new estates and, in some cases, blatant developer profiteering, is exacerbating Melbourne’s housing affordability crisis and its overall liveability by putting a new house-and-land package on the city fringe out of reach for many families and first-home buyers.

The latest figures from project marketers Red23 – based on asking prices for available stock – show lot prices increased five per cent in February hitting a median of $346,000 across the seven growth area markets of Cardinia and Casey in the south east, Hume and Mitchell in the north and Melton, Wyndham and Whittlesea in the west. Collectively they make up 40 per cent of the national lot market.

When excluding the most affordable suburb of Mitchell (at $302,000) – the Melbourne median lot price was $349,000.

Red23 notes that for the first time all seven growth areas had a median lot price of more than $300,000. A year ago none of the growth areas had a lot price of more than $300,000 while five years ago the median lot price in Melbourne was just over $200,000.

The biggest annual price gain has been in Melton, with median lot prices up 78 per cent to $303,000 while the most expensive lots at $395,000 are in Cardinia and Casey, which lie more than 45 kilometres south east of the Melbourne city centre.
“The Melbourne growth area land price continues to push closer to the $350,000 mark and further exacerbate affordability concerns,” said Andrew Perkins, general manage of research at Red23.

Mr Perkins said a key reason for the recent spike in pricing on the demand side was population growth.

“Victoria’s population growth continues to outnumber the rest of the nation, rising by 2.3 per cent, or 147,400 people in the 12 months prior to September 2017, compared with 123,100 people in NSW. That equates to growth of more than 2,850 people per week,” he said.

Mr Perkins said new land supply needs to be unlocked through swift planning processes of precinct structure plans within Melbourne’s growth area corridors to halt the current price surge.
The Urban Development Institute of Australia’s latest State of the Land Report recorded Melbourne median lot price at $304,000 in the December 2017 quarter and at $281,000 for the whole of 2017, up from $236,000 in 2016.

Sydney’s median lot price was $476,000 and South East Queensland’s was $264,000.

The UDIA is pushing for major planning reform at a state and local government level to increase the supply of land, the abolition of stamp duty in favour of a broad-based land tax and the removal of foreign buyer and developer taxes and surcharges.

Source: The Australian Financial Review