Melbourne house and land sales in big trouble

If you’ve been following my blogs you’d know I’ve been concerned with 2 sectors of the Melbourne property market for some time:

1. The large number of  off the plan high rise apartment projects coming on stream in the next few years.

2. The new house and land market – there’s a huge oversupply.

The problem is marketing companies are encouraging property investors into both of these sectors and these, often beginning investors, are likely to to get themselves into trouble.Today I’d like to look at the house and land market in Melbourne.

According to valuers Charter Keck Kramer:

There will be no swift recovery in the outer-Melbourne residential new housing market, with a confluence of factors contributing to the unprecedented high rate of lots being returned to residential developers.

In fact 30% of released land is being handed back to developers by builders because sales are falling through, as reported here in Property Observer.

Larry Schelsinger recently reported in Property Observer:

According to the latest quarterly report from Oliver Hume, there has been a 29% increase in the number of residential projects being marketed on Melbourne fringes since 2006 with the real estate group forecasting 160 active projects in 2013.

Oliver Hume anticipates that land sales are likely to fall to around 65 per project a year.

“Put simply, since 2006, there has been a 29% increase in the number of projects and a 5% decline in the number of land settlements.

“For the majority of projects, double-digit sales rates may be a long way away,” says report author Andrew Perkins.

Land prices have now fallen for by a cumulative 16% over eight consecutive quarters with an average residential lot price of $190,000.

Click to enlarge

Melbourne land prices peaked at an average residential lot price of $225,750 in December 2010.

At the same time, developers continue to offer highly contentious rebates to customers with the median rebate rising slightly during the quarter to $15,000.

Median rebates ranged from $10,000 in Cardinia and Whittlesea to $16,500 in Casey.

At the same time as experiencing an oversupply of land these areas are also lacking infrastructure and facilities:

Exacerbating the challenges facing fringe land developers, a recent report by Essential Economics warned that Melbourne’s growth areas needed $10 billion spent on new education, transport and health services in the next 15 years – this from a Victorian government trying to rein in spending.

In addition, Essential Economics found there were more limited job opportunities in the 10 councils that form Melbourne’s outer urban ring including Wyndham, Melton, Hume, Whittlesea, Yarra Ranges, Casey and Cardinia.

If you want to get an idea of the huge oversupply just hop on to RealEstate.com.au and type in Point Cook or Truganini and you’ll be shocked how many properties are for sale.

I’ll save you the trouble: Point Cook and surroundings – 3,830. Truganina– 4,400

And it’s much the same for many of the northern and western outer suburbs in Melbourne.

So why are the stats showing the Melbourne property market is rising?

Considering the outer suburbs are performing so poorly, this just shows the strength of the established home and apartment market in Melbourne’s inner and middle ring suburbs where there is a shortage of good properties.

There are definitely some opportunities in Melbourne’s property markets and some real traps for the unwary. I’ll be explaining what’s really going on in the property markets around Australia at my upcoming National Property & Economic Market Updates around Australia in march and April. Please click here, get all the details and reserve your place.

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Michael is a director of Metropole Property Strategists who create wealth for their clients through independent, unbiased property advice and advocacy. He's been once agin been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'Melbourne house and land sales in big trouble' have 7 comments

  1. February 26, 2013 @ 7:31 pm Geoff Mether

    First time I’ve heard if ‘god’ properties! Whilst in Sydney (Chatswood shopping centre) I noticed people selling off the plan apartments in Melbourne – not on my shopping list today!

    Reply

    • February 27, 2013 @ 10:07 am Michael Yardney

      Thanks for the “spell check” Geoff – I’ve corrected the error

      Reply

  2. March 18, 2013 @ 9:37 pm house and land packages

    Thanks for the share of useful information.

    Reply

  3. April 2, 2013 @ 8:17 pm land packages Queensland

    Hi,
    I am looking for this info and thanks for the share.

    Reply

  4. June 18, 2013 @ 6:37 pm house and land packages Melbourne

    Thank you for sharing information about home and land sales.

    Reply

  5. August 12, 2015 @ 9:36 pm LK TAN

    I am a little confused. I am thinking of a house and land investment package so did exactly what you suggested and typed in to RealEstate.com.au to buy 3 and 4 bedroom houses in Point Cook and Truganini.
    I was only able to find 387 results in Point Cook and just 291 in Truganina, and rental vacancy rates of only 1.9% and 1.1%!
    Your article was Feb 2013, so I am guessing things have changed a lot since then and it looks good to buy here now?
    Also SQM research shows a 10.7% asking price increase over the past 3 years.
    Im also looking into Tarneit as it only has 48 houses available for rent and also a 1.1% vacancy rate.
    By comparison Melbourne CBD apartments showed 588 available for rent and a 4.2% vacancy!

    Reply

    • August 13, 2015 @ 11:20 am Michael Yardney

      LK – I would not buy in any of these suburbs – you’ve jsut said that values rose less there in the last 3 years than the Melbourne average achieved in the last year alone.

      That’s only one of the resons why I would avoid these markets

      Reply


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