Victoria’s median lot size has shrunk four square meters in just three months, with buyers being forced to pay more for less to get into the housing market.
The median lot size in the state’s new estates was 366sq m in the June quarter — drastically down from the previous record low of 370sq m in the preceding three months, according to RPM’s latest Greenfield Market Report.
The median price for a block on the city’s fringes was also up 3.6 percent for the quarter — and 9.6 percent year on year — to hit $379,000.
RELATED: Blocks in Melbourne’s outer suburbs shrink as prices increase
Blocks shrinking in Melbourne housing estates to keep prices down, report says
Blocks shrinking as land sales hit record highs in Melbourne estates
Rising costs are a significant factor driving the price hikes, but developers are also trying to balance keeping blocks affordable by chopping down their size.
RPM project marketing managing director Luke Kelly said with more buyers priced out of the established housing market and turning to greenfield land, developers were comfortable putting prices up as serious buyers would do so anyway.
Demand remains for outer suburban blocks but is slowing down due to interest rate rises, cost of living pressures and higher building costs.
“Developers aren’t too displeased with a slower sales rate because it allows them to complete construction,” Mr Kelly said.
“People who buy today are probably looking at a good 15 months for their house to be ready.”
With household incomes only marginally increasing over the past couple of years, Mr Kelly explained that buyers were compromising on block sizes and were more inclined to buy smaller ones.
“Because of this demand, developers are producing smaller lots,” he said.
“The affordability is still there for buyers whose household income hasn’t changed, and developers can still produce land and service the market”.
Latest data from property services group Oliver Hume also showed new residential land prices in Melbourne’s growth areas had reached a record high of $380,000 for the June quarter, up $12,500 from March and a massive $108,000 in five years.
That report revealed blocks in the Cardinia municipality had grown in price by an alarming 31.71 per cent year on year, while Casey and Greater Geelong areas grew by 19.59 and 31.72 per cent respectively.
Hume, Melton and Mitchell municipalities also grew rapidly, with Mitchell shire blocks up 24.3 per cent ($65,500) in the past 12 months to reach an average cost of $389,000.
Oliver Hume project marketing chief executive officer Julian Coppini said while the June quarter showed a reasonable level of sales and rising prices, the September quarter was likely to show considerably lower sales volumes and a stabilization in price levels.
“This is being driven by dampened consumer and buyer sentiment, especially around interest rates and inflation among other issues,” Mr Coppini said.
Amid rising interest rates and a lack of stock in the housing market, the report showed 60 percent of buyers were signing contracts within just 21 days of inspecting a block of land, with 16.3 percent of buyers locking in contracts within seven days.
“In 2021 and in early 2022 we saw many buyers being driven by fear of missing out on their chosen home site,” Mr Coppini said.
“In more recent months we have seen buyer behavior continue to moderate given market conditions…we think buyers will take more time going forward as they look at various options closely.”
Urban Development Institute of Australia Victorian chief executive Matthew Kandelaars said HomeBuilder and other stimulus measures drove “record demand for land in Melbourne’s growth corridors throughout the pandemic, with lot sales in 2021 reaching a record 33,700, which is about double the long-term average” .
He said in response to rising prices and lifestyle choices, the product mix across the market had pivoted towards smaller lots.
“We’ve definitely seen that rising interest rates and cost of living pressures have forced many buyers to reassess borrowing capacity and buying decisions, which has seen a stabilization in market activity in 2022,” Mr Kandelaars said.
“That said, the market is adapting and many new land releases continue to incorporate smaller lot sizes to help soften the landing.”
Belle Property Geelong agent Jack Davis said new estates in Torquay and Mt Duneed offered smaller lot sizes, but appealed to buyers as an affordable entry point to the market.
“Less maintenance appeals to nine out of 10 (buyers),” he said.
He said Villawood estates such as Mt Duneed’s Armstrong estate also offered plenty of nearby amenities including playgrounds, supermarkets, sporting ovals and schools, which appealed to families and provided an alternative to a large block of land.
“It’s mostly families, but also elderly people wanting something simpler, or young people buying their first home,” Mr Davis said.
PERKS OF A SMALLER BLOCK
Dianne Geddes bought her 177sq m Maidstone property in 2012 and sings the positives of lower maintenance.
She previously owned a 1940s era house on a larger block, which needed “significant renovation”.
“We decided to sell that and buy something brand new with less maintenance,” Ms Geddes said.
The only upkeep now is maintaining the small garden, which was perfect for her as a business owner who worked “ridiculous hours”.
“But I still long for grass and I’ve become very fond of gardening,” Ms Geddes added.
“I’d like a bigger garden in the future and a single-storey home as well.”
Ms Geddes said she hoped to purchase a larger block in about 10 or 15 years.
Although she would love to stay in Maidstone, with the cost of land she “might be forced to go out a bit further”.
She lives with her son, Tom Rendle (22) and dogs Curl and Rico.
Sign up to the Herald Sun Weekly Real Estate Update. Click here to get the latest Victorian property market news delivered directly to your inbox.
MORE: St Kilda legend Fraser Gehrig boots Beaumaris pad for $4m+
Rod Law: Sports media veteran lists East Melbourne terrace
Five-time Olympian Jacqui Cooper’s childhood Brighton home up for sale with $8m+ price hopes