Housing lot sales to plummet 43pc in 2022, but prices will rise

66 views 2022-03-14 13:45:26

National housing lot sales are expected to fall by 43 per cent this year – the equivalent of 32,000 fewer sales – as supply constraints bite in Sydney and as demand for new housing in Melbourne resets after a record volume of sales occurred in 2021, according to leading greenfield housing market analyst Colin Keane. Mr Keane, director of Research4, which partnered with the Urban Development Institute of Australia on its latest State of the Land Report, said the moderation of demand would be the “saving grace” for a sector under significant pressure to deliver after land sales surged 33 per cent last year to 76,100 on the back of the HomeBuilder program and other stimulus measures.

Despite lot sales falling sharply, Mr Keane said lot prices, which rose in every capital city last year except Perth, would climb even higher in the first half of 2022 because demand will still outstrip available supply, which fell to “critically low” levels last year in Sydney, Brisbane and Melbourne. “2021 was an incredibly strong year, which depleted the selling and production capacity of greenfield markets,” Mr Keane told The Australian Financial Review. “This rundown in development capacity will be offset by a moderation in demand of about 43 per cent [compared with last year].”

“If the industry had continued to sell at the levels of 2021 there would have been widespread pricing and affordability issues,” Mr Keane said. The latest UDIA report shows that Melbourne drove the unprecedented level of activity in greenfield land markets in 2021, recording a 125 per cent increase in lot sales to 33,700 – 44 per cent of the total national market – while prices rose 3 per cent to $327,000 for a median-sized lot of 371sq m (down 5 per cent).

“Melbourne sale volumes were ahead of demand in 2021. They pulled forward demand by about four months, which will impact sales this year,” Mr Keane said. This pull-forward in demand was reflected in a 38 per cent drop in Melbourne lot sales in February, compared with a year ago, and a 34 per cent drop in sales over January, according to the latest figures from agency Core Projects. “There are less buyers in the market. Our enquiry rates have dropped by around 20 per cent from last year,” explained Grant Neilson, greenfield specialist at Core Projects.

“But there are still more buyers than there are land lots available, and therefore, the drop in sales links back to a supply issue, not a demand issue,” he said. In Sydney, where supply is a much bigger issue after the number of active housing estates halved to 75 last year and average project sizes fell to just 75 lots, median lot prices climbed 14 per cent to $544,000 last year. This was despite 9200 lots sold over the year, 17 per cent higher than the seven-year average.

“But there are still more buyers than there are land lots available, and therefore, the drop in sales links back to a supply issue, not a demand issue,” he said. In Sydney, where supply is a much bigger issue after the number of active housing estates halved to 75 last year and average project sizes fell to just 75 lots, median lot prices climbed 14 per cent to $544,000 last year. This was despite 9200 lots sold over the year, 17 per cent higher than the seven-year average.

“Sydney has a huge volume of unmet demand. There’s eight months of demand still on the table,” Mr Keane said.
The south-east Queensland land market – the second-biggest after Melbourne – also had a bumper 2021, as sales rose 31 per cent to over 17,000 lots. South-east Queensland also registered its first meaningful price rise since 2008, gaining 5 per cent to $272,000. Despite this surge in sales, Mr Keane said south-east Queensland still had four to five months of unmet demand heading into 2022.

While Sydney and Melbourne have about four years worth of zoned land to draw on and Brisbane about seven years, according to Mr Keane, the UDIA urged state governments to pick up the pace of land rezoning to ensure sufficient future supply, given it takes about five years to convert a farming paddock to a marketable housing estate. “The relentless drain on our declining housing supply has brought us to a defining moment. Either governments commit to supply-boosting initiatives now or accept a deep and prolonged affordability crisis in three years,” UDIA national president Max Shifman said.

This article is from Australian Financial Review, please click the following link for the original article: https://www.afr.com/property/residential/housing-lot-sales-to-plummet-43pc-in-2022-but-prices-will-rise-20220309-p5a31m

SHARE

WechatIMG128
Subscribe to our
News Updates
Thank You!

Our service team will contact you to assist you further!