Tough year ahead for development land sales in Victoria while investors take a larger share
Oliver Hume chief executive of project marketing Julian Coppini.
Victoria’s land market is shaping up for a rocky 2024, with developers continuing to use incentives to drive demand and increase sales rates that are bubbling along at a third of historical levels, according to property services group Oliver Hume.
It said incentives would continue to push down prices for buyers in the short term, but would ultimately underpin a recovery in sales volumes and prices next year.
Oliver Hume chief executive of project marketing Julian Coppini said it was pinning hopes of a recovery in the new-land market on continued strength in the established market, growing buyer demand arising from strong population growth, and greater interest rate certainty – including potential rate cuts later this year.
“Our key forecast scenario is that 2024 will be a year of consolidation and transition for the Victorian residential land market, led by Melbourne, before a sustained recovery commences in 2025,” he said.
“The level of residential prices will be key in 2024. After a temporary pause, we expect established residential property prices to continue rebounding in 2024, given the combined impact of growing housing shortages and more interest rate certainty.
“In contrast, Melbourne’s new residential land market prices are expected to moderate in the first half of 2024, which we expect will lead to a recovery in sales volume.
“Although they have edged higher in recent months, the volume of Melbourne land sales remains around a third of long-run average levels.
Land sales rates in Victoria are at a third of historical levels.
“Previous trends suggest a sustained recovery in sales volume requires prices to moderate.
“Beyond this expected adjustment, we anticipate Melbourne’s new land prices will return to trend growth, possibly in early 2025.”
December sales data from Oliver Hume, which sells land on behalf of developers, shows that while owner-occupiers remain the dominant market segment, investor activity strengthened in the last month of the year.
Investors accounted for about 49 per cent of all sales in Victoria in December. It was the segment’s highest market share last year and significantly higher than the long-term average.
“Increased investor activity was driven by the release of smaller lot stock and an increasingly positive rental market characterised by rising rents and very low vacancy rates,” Mr Coppini said.
Migrants accounted for about 60 per cent of all sales in December, led by those born in Sri Lanka.
“We expect the share of migrant buyers to remain high, potentially increasing further, given high levels of overseas migration,” Mr Coppini said.
