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Whittlesea land price boom expected to last as demand for undeveloped land continues to rise

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GREENFIELD land sales are booming across Whittlesea and show no signs of slowing down according to a prominent Melbourne real estate group.

Luke Kelly, managing director for RPM, a real estate group, said demand for undeveloped land on the outskirts of Melbourne had exploded in the past year.

The group’s September quarterly report showed a record high of 7835 gross lot sales across Melbourne and its fringe regions in the past three months, 2.5 per cent above the previous quarter’s peak.

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Melbourne’s median lot price also rose to a new high of $326,000, marginally above the previous peak in the March quarter of 2019.

Mr Kelly said while lot sales in Melbourne’s northern growth corridor – encompassing the Hume, Whittlesea, Sunbury and Macedon, and Mitchell municipalities – fell by two per cent during the September quarter, it was mainly due to a lack of stock in the Craigeburn and Greenvale areas.

He said sales were soaring in the southern Mitchell towns of Wallan and Beveridge.

“There are a lot more projects in Beveridge that have come to market, which is why you’re seeing the sales in Beveridge going very strongly,” he said.

“It’s still quite an affordable area when you compare Beveridge to Donnybrook, Craigeburn or Greenvale.

“Wallan has also been going extremely well. Once again you’re getting good value for dollars up there because the blocks are a little bit cheaper and a little bit bigger.”

Mr Kelly said demand for land in the Whittlesea region was also strong, with the area accounting for 39 per cent of gross sales across Melbourne’s north despite sales activity falling eight per cent in the September quarter.

Mr Kelly said RPM had observed a trend towards smaller lot sizes in greenfield areas as developers fought to keep stock affordable.

In in the past three months the median lot size across Melbourne reduced by 2.3 per cent to 383 square metres, while the median lot price grew to $326,000.

“I think 350 square metres is a pretty good guide for where land size will end up over time,” Mr Kelly said.

“A product that is now a lot more accepted in the marketplace is medium-density housing of around 150 square metres, and five years ago the prominence of medium-density in the greenfield space wasn’t really there.

“When you start increasing your percentage of that sort of stock over the whole northern area, if it’s around 10 per cent it’s going to skew the average lot size down when you’re looking at it holistically.

“The reason why we’re putting more of that in there is so we can supply the market segments that are around the $380,000 to $450,000 house packages that people can buy and move into.

“The bigger lots over 500 square meters have gone up [in price], and there’s not a huge number of people who can afford them in the greenfield space, and so they’re not being produced as much as what they have been in the past.”

Mr Kelly said he expected to see sales fall and developers restrict their number of offerings to keep land prices under control.

“What we’re seeing at the moment is unsustainable. There are approximately 30,000 lots that have been sold in Melbourne over the past 12 months, and we normally do 18,000. It’s not double, but it’s not far off it,” he said.

“There are some projects that are 18 months out on title release, so they’re selling them quicker than they can build them. You can’t just keep doing that or title releases blow out too far.

“Off the back of that, you’ll see some controlled releases coming to the market. Developers are very sensitive about making sure they’re not putting prices up too much.

“Instead of releasing 23 lots on the market in a month, they might release 10 lots, and therefore instead of doing 250 lots for the year, they might do 120 or 150 lots.

“Rather than releasing a lot more land and putting prices way out of reach, they’ll slow it down by not putting as much stock on the market. I think that’s a good way of doing it, because affordability in the greenfield space is a key factor.”

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