UDIA Victoria Media Release
While Brisbane and Sydney greenfield markets have bounced back from political and financing challenges faster and better than Melbourne, Australia’s most liveable city still offers the greatest potential for development, latest research shows.
The Victorian division of the Urban Development Institute of Australia (UDIA Victoria) has today presented new market intel on the Melbourne greenfield market, delivered by research author and Director of Research4 Colin Keane.
According to the data, the national greenfield market has experienced a 62% reduction in total activity over the past two years. The September 2019 quarter has seen an improvement across all metro markets. However, the Melbourne market has not rebounded as strongly as Sydney, Perth or South East Queensland (SEQ).
Based on population in-flows, the Melbourne greenfield market is currently selling approximately 52% less than it should be. Sydney is selling 25% below demand, SEQ is selling 10% below demand, and Perth is selling 20% below expected levels of activity.
Melbourne’s sluggish recovery has been driven by two major factors: long settlement timelines (from contract signing to settlement) and land prices.
“In Melbourne, it’s normal for a buyer to wait 12 months between purchase and settlement of their land.
“The good news is, that’s down from 15 months in the previous quarter. The bad news is that 12 months is still too long, fuelling high cancellation rates and a level of settlement risk that makes the banks nervous,” said Ashley Williams, President of UDIA Victoria.
Settlement times across the Brisbane and Perth greenfield markets are typically 3-6 months. Sydney is at 6-10 months.
“We need to look at why we’re selling so far ahead in Melbourne. Industry needs the pre-sales to meet financing requirements at the very beginning, but then our planning system isn’t set up to move projects through at an appropriate pace. There’s a disconnect there that is threatening development at a time when we need more homes than ever,” said Mr Williams.
“Brisbane and Sydney are recovering well from political challenges and tighter bank lending, while Melbourne is lagging behind,” said Director of Research4 Colin Keane.
“Since 2017 Melbourne has produced and sold 49,000 lots. It is estimated that currently 19,000 are still yet to settle.
“The long settlement timelines have meant that Melbourne land prices are less responsive to changing market conditions, which in turn creates valuation issues and ultimately slows activity” he said.
“There remains great opportunity across the Melbourne greenfield market if we can reduce settlement times and deliver the right amount of homes to keep prices in check,” said Mr Williams.
“Fortunately, State Government is engaging in genuine consultation with industry to address these issues,” he said.
Key findings (September 2019 quarter) • National greenfield market experienced a 29% improvement in total activity for the September 2019 quarter
- Melbourne greenfield market lifted activity by 16% for the quarter, however total activity is 54% lower than a year prior
- Based on population in-flows, Melbourne greenfield market is selling approximately 52% less than it should be
- Melbourne settlement times are at 12 months, down from 15 months in the June quarter.
- Brisbane settlement time: 3-6 months
- Perth settlement time: 3-6 month
- Sydney settlement time: 6-10 months
- Estimated that 19,000 Melbourne greenfield lots have been sold over the past two years that are yet to settle
- Melbourne median land price is $326,000; estimated to be $46,000 too much
- Melbourne ‘return’ rate is currently at 29 percent of gross activity, i.e. for every 10 blocks of land contracted, three are being returned to the price list.
- SEQ return rate: 13 percent
- Sydney return rate: 15 percent SEQ return rate: 13 percent o Sydney return rate: 15 percent
Engagement and Communications Manager, UDIA Victoria
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