Why new housing crisis looms for Geelong homebuyers

Geelong homebuyers are already paying more than Melbourne for an average block and face another surge in land prices. See how it can be avoided.

The next development frontier is to the north and west of Geelong. Picture: Alan Barber

Geelong could face a new housing affordability crisis in the next five years if residential land supply does not improve before expected demand in the region.

Analysis by independent residential property research firm Research4 showed Geelong’s $415,000 median lot price had been higher than Melbourne since June 2021 and was holding up despite land sales diving to an average of 22 a month in the March quarter.

Research4 director Colin Keane said demand was expected to pick up by the end of the 2024 as income tax cuts and anticipated interest rate cuts are passed on to homebuyers.

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Speaking at an Urban Development Institute of Australia event in Geelong, Mr Keane said the Covid pandemic had a disruptive effect on Geelong’s land market, with monthly sales peaking at 625 lots bringing forward several years of purchasing decisions, but has also since seen a stall in development of new estates.

Research4 director Colin Keane.

Mr Keane estimated that titled and untitled land available in existing estates and zoned land approved to be turned into residential lots represented about three years worth of activity, once demand for residential land improved.

He estimated the northern and western growth corridors supply of about 45,000 lots would push that out another 15 years.

Mr Keane said research on the fair value of residential showed the median list price for a residential lot in Geelong of $415,000 was overvalued, and should be around $352,000, a $63,000 differential.

There is several years worth of land available for development at Armstrong Creek. Picture: Alan Barber

However developers were offering incentives and rebates to bring purchase costs down for buyers by as much as $50,000.

There was about 28 projects in the Geelong region with 100 lots or more remaining, while the number of new projects coming in to the market was 65 per cent down on the long-term average.

Mr Keane said the spike in demand during the Covid period resulted in price growth of about 6-7 per cent quarter, which he attributed to a lack of estates offering sufficient competition to maintain affordability.

A surge in demand during the Covid pandemic brought forward several years worth of building decisions.

“The average mum and dad buying over the 2021-22 period paid an extra $37,000 for their block of land that they didn’t have to pay,” he said.

Mr Keane said if the northern and western growth corridors don’t come on line in the next three years, the pressure on prices could exceed that.

“Geelong is demonstrated historically to be the most price sensitive market of all greenfield markets in the country,” Mr Keane said.

“When it gets on the pressure pricing is maximised and that’s when you lose affordability.”

UDIA Geelong chapter deputy chair Adam Jaques said recent changes in government housing policy had focused attention that a key lever for addressing housing affordability is increasing supply of land and housing.

“Some of our key strategic priorities that directly address that need for supply and affordability include advocating for the long term supply of developable land, including key infrastructure to support the land being unlocked and funding to bodies like the Victorian Planning Authority so they can continue to offer assistance in Geelong as the planning authority or as an advisory body.”

Executive director – placemaking, Tennille Bradley said the City of Greater Geelong valued the opportunity connect with industry and stay informed with key trends.

“We understand that other councils in growth areas across the state and nationwide are experiencing similar opportunities and challenges,” Ms Bradley said.

“We are pleased with the progress being made as we continue to deliver Precinct Structure Plans (PSPs) for the Northern and Western Geelong Growth Areas.”

“We are continuing to work with the UDIA and remain optimistic of delivering outcomes which balance the environmental, social and economic needs of our community.”

Originally published as Why new housing crisis looms for Geelong homebuyers