Developer value-add incentives like rebates and low deposit terms as well as APRA's changes on serviceability assessments and interest rate announcements have begun to turn Melbourne’s land and house market.
Project marketer RPM’s residential market review reveals that Melbourne and Geelong’s new housing markets are showing signs of recovery due to a boost in buyer sentiment and positive sales momentum.
The pace of decline in quarterly sales volumes slowed during the June quarter with total lot sales across Melbourne’s and Geelong’s land market falling 8.6 per cent to 1,796 lots compared to the previous quarter.
While there was a slight uptick in monthly sales volumes from April to June Median lot price declined 5.2 per cent to $310,000.
Melbourne's Western growth corridor — were there is the greatest competition among new housing estates — recorded 729 gross lot sales for the quarter, accounting for 41 per cent of total sales across all growth corridors.
However, gross lot sales have fallen 68 per cent over the last four quarters compared to the year prior.
While the share of total lot sales in the Northern growth corridor increased from 23 per cent to 27 per cent, the 477 gross lot sales for the region represented a 58 per cent fall from the same quarter last year.
The south east growth corridor recorded 404 lot sales in the June quarter—half the sales volume compared to the same quarter a year ago.
Nevertheless, the share of total gross sales across all growth corridors increased from 15 per cent to 22 per cent.
In an attempt to reboot the market Melbourne developers have been offering house-and-land incentives valued up to $45,000 as sales of in the greenfield suburbs grind to a halt and lot prices start to fall.
The incentives include tens of thousands of dollars worth of price discounts, free landscape and fencing, the payment of builder deposits, pre-loaded credit cards and even the free installation of security systems.
RPM’s head of Communities Luke Kelly said there had been a slight uptick in monthly sales volumes from April to June, indicating that Melbourne's land market had potentially bottomed out.
“Competition among developers through reduced prices and continued incentives and rebates generated higher sales activity in the sub-$300,000 market,” Kelly said.
“There’s been a return of first home buyers given the decline in the median land price and increased level of buyer enquiries on the back of the June interest rate cut and news regarding APRA’s removal of the 7.25 per cent mortgage rate test.”
RPM said that while the data showed a positive change in the number of first home buyers in the lower quartile of budgets, we expect this to improve further — and as early as the September quarter — as the full effect of two interest rate cuts and APRA changes kicks in.
“We expect a gradual rather than a sharp rebound towards the back half of 2019 and into 2020,” Kelly said.
Oliver Hume chief operating officer Julian Coppini revealed that enquiries and sales at Oliver Hume projects in Melbourne had improved over recent weeks.
“This is a trend mirrored in the broader residential property market where auction clearance rates are now trending higher and prices appear to have stabilised and, in some cases, rebounding,” Coppini said.
“While prices moderated in the June quarter, other key indicators, including total volumes and time on market, are showing signs of recovery as sentiment and demand improves.”