News & Tips
Melbourne land buyers switch focus to smaller lots
BY GEORGE BOUGIAS, NATIONAL HEAD OF RESEARCH
Having the right data as quickly as possible is important in any industry not least in property.
One of Oliver Hume’s advantages is our access to ‘real-time’ new land sale information which can be juxtaposed with other proprietary data sources including customer survey data.
Together these data sources provide early warning of current and emerging trends in the property market.
One of the most interesting trends we observed during the recent upswing was the continued decline in lot sizes across the board. In some cases, we saw a sharp adjustment occur when a tipping point was achieved.
Since early 2014, the share of metropolitan Melbourne land sales in the 200-300 sqm market segment more than doubled from around 8 per cent to more than 17 per cent. And within the segment, there has been even more impressive growth.
Lots below 200 sqm also rose strongly from a low base over the period, from 0.4 per cent to nearly 2 per cent.
Within the 200-300 sqm cohort there were some interesting trends.
For example, the share of lots in the 251-275 sqm range grew especially strongly, from 1.6 per cent to 5.7 per cent of all lots sold, an increase of more than four times.
Many markets developed identifiable ‘tipping points’ that triggered changes in the behavior of both buyers and vendors.
An example is Plumpton.
Over the course of 2017 Plumpton volumes and prices both experienced strong increases.
However, as the end of 2017 drew near, the market had become too hot for many buyers.
At this point buyers began seeking out smaller lots with developers quickly adjusting their product mix to the new paradigm.
This saw the volume of lots sized below 250 sqm surge from less than 5% of total sales to more than a third in the space of six months.
The pattern was repeated across many other markets and fit perfectly with what we are seeing across the broader metropolitan Melbourne market.
Higher density living, including both townhouses and apartments, is now no longer restricted to the inner and middle suburbs.
We are seeing higher densities emerge everywhere as the need to accommodate a growing population remains.
This provides great opportunities for developers who can produce great small lot product.
The current cyclical slowdown in the property market should be viewed as a temporary phenomenon.
The small-lot trend observed in the land market is a sample of what is to come and represents a structural shift in the market that will only accelerate in the future.
For example, we see significant potential for growth in the sub 200 sqm category.
This new frontier will be reached for the same reasons we have seen strong growth in the 200-300 sqm category. These include record population growth, shifting demographics, changing consumer preferences and affordability pressures.