Positive sentiment is hitting the Australian housing news, with a recent report indicating the Melbourne land market has bottomed.
Data shows an increase in activity from first home buyers boosted by recent APRA and interest rate announcements. This uptick in sales is also expected to boost the second home buyers market, resulting in a gradual increase of demand in house and land packages in Melbourne during the second half of 2019 and into 2020.
RPM Real Estate Group’s Residential Market Review
The RPM Real Estate Group’s Residential Market Review reveals that total lot sales across Melbourne and Geelong fell 8.6 per cent compared to the previous quarter.
The report highlights a slight uptick in monthly sales volumes from April to June, indicating the land market has bottomed.
Recent APRA and interest rate announcements are attributed to creating a positive sales momentum for Melbourne’s land market. Sales volumes during the June quarter showed a slower pace of decline, while the median lot price declined 5.2 per cent to $310,000 from the last quarter.
First-home buyers return to the market
RPM’s head of Communities Luke Kelly says first home buyers are returning to the market. Mr. Kelly notes an increased level of buyer enquiries on the back of the June interest rate cut and APRA’s removal of the 7.25 per cent mortgage rate test.
Mr Kelly adds that competition amongst property developers in Melbourne has driven price reductions. “Continued incentives and rebates generated higher sales activity in the sub-$300,000 market,” he says.
He also highlights that first home buyers were the most affected by the tighter lending conditions over the past few years. “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 – as early as the September quarter – as the full effect of two interest rate cuts and APRA changes kicks in,” he adds.
Are you a first home buyer looking to break into the property market? Use our borrowing power calculator to work out your budget.
Second-home buyers: Increase demand in house and land packages in Melbourne expected
Mr. Kelly says that stabilising prices should promote confidence amongst the second home buyers market. He envisions recent positive real estate news will encourage homeowners to sell their current property and upgrade to a larger house and land package.
“We expect a gradual rather than a sharp rebound towards the back half of 2019 and into 2020,” he said. “The increase in unsold stock over 2018/19 will take time to absorb, especially larger size lots that are attractive to second and third home buyers.”
“In addition, combined with new masterplans featuring smaller lot sizes of around 375 sqm, the median land price needs to reduce below $300,000 which is considered fair value and in line with first home buyer budgets,” he said.
Read more: what is negative gearing?
Apartments and townhouse market
RPM’s report indicates that increased stamp duty and taxes, as well as lending curbs on local and overseas investors, continue to impact the apartment and townhouse market.
“Apartment approvals were down 27 per cent from the March quarter. The sector has been working through a considerable level of supply, which is applying further downward pressure on prices in an already weakened market.”
Other dwelling approvals declined 17 per cent from the March quarter and 32 percent from the June quarter last year.
The report also noted that with townhouse approvals down only 1.5 per cent below the previous quarter, medium density approvals could be approaching the bottom of the cycle.
Looking for house and land packages in Melbourne? Subscribe to Property Market Investor to get matched with personalised investment opportunities.