Geelong house and land packages could hit $1m as land supply runs low
Surging demand from Melbourne could push Geelong house and land packages to $1m, pricing out local first-timers in just a few years, with supplies forecast to run out before 2025.
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Geelong house and land package prices could soar to $1m by 2025 and other regional cities may not be far behind, Victoria’s peak development body has warned.
A new report by the Urban Development Institute of Australia’s Victoria arm estimates land for new houses will run out by early 2024 in the regional city, with experts estimating just 6434 off-the-plan lots remained in active estates at the end of September.
None of them are titled, meaning construction cannot commence until they are — leaving some buyers to wait up to two years.
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There were 3750 lots sold in the 12 months to August, with demand from Melbourne-based buyers surging.
The Residential Supply and Demand Assessment released to members last month warns Melbourne-employed homebuyers eyeing satellite cities are chewing through regional land faster than population modelling has accounted for.
Estate operators are already reporting land sales above $500,000 amid concerns people who grew up in the city could soon be priced out of it, with wider Geelong’s median land price reaching $319,000 at the end of August.
UDIA Victorian chief executive Matthew Kandelaars said while Geelong was the subject of the report, its concerns extended to other cities near Melbourne as priced out buyers would continue to turn to the next most affordable option.
“I think this is an issue across all of these regional areas … Ballarat and Bendigo, without a doubt they have the same issues,” Mr Kandelaars said.
Geelong’s main land hub, Armstrong Creek, has recorded a 13 per cent increase in land prices over the past year to a $276,000 median, but in a worst-case scenario the report shows that figure could soar to $498,543 by 2024.
Separate realestate.com.au data shows Greater Geelong’s median house price skyrocketed almost $100,000 from $570,000 to $665,000 in the past 12 months.
While land has been earmarked to accommodate an additional 40,000 homes in growth areas to Geelong’s north and west, it is not expected to be viable for sales until 2026.
Core Projects greenfields specialist Grant Neilson also worked on the report and said the 3750 sales in the past year represented the volume needed to sustain a 3 per cent population growth.
The city’s Greater Geelong Settlement Strategy for 2020 anticipates just 2 per cent population growth.
And the remaining 20 per cent of the Armstrong Creek growth zone not owned by developers is expected to be increasingly difficult and expensive to work with — putting further pressure on prices, Mr Neilson said.
“The complexities and costs to develop some of them almost creates a negative land value, if you developed it – you would lose money,” he said.
Mr Neilson pointed to a recent $535,000 land sale at the Warralily estate, estimating that with building and site costs the finished product would top $1m.
“We will definitely start to see that $1m mark starting to be more of the standard,” Mr Neilson said.
“And it’s very hard for price to come back. Once it gets up it doesn’t tend to come back with supply and demand.
“This is now a question of affordability, first-home buyers from Geelong aren’t going to be able to afford a home in the town they grew up in.”
Jane Beardwell and Matthew Alvis recently bought a block of land in Armstrong Creek for their first home.
The pair currently live in Pascoe Vale and initially sought a home in Melbourne.
“But it’s too competitive in Melbourne,” Ms Beardwell said.
“So we fast-tracked a long-term plan to move down to the coast.”
They initially wanted a 450sq m block, but were informed the wait could be up to 18 months and instead increased their budget to buy a more than 600sq m block available immediately.
She added with land prices rising in the few months they had looked in the region, a $500,000 median by 2025 seemed “very realistic”.
Geelong-based schoolteacher Jordan Moran has been looking for a 400-500sq m block of land in the area’s new estates for six months.
After missing out on multiple land releases he said it was becoming “frustrating”, but he remained hopeful he would eventually buy a block.
“You are up against 200 people for those ten lots in a release, and you miss out then the following week it just feels like it’s a repeat,” Mr Moran said.
“You’re wondering when it’s going to happen. But I’m still pretty hopeful I’ll get a bit of dirt.”
The report recommends the government do more to work with land owners who are yet to sell in areas that are earmarked for development, fast tracking the rezoning of land in future growth areas and to consider rezoning the as-yet undeveloped Western Industrial Precinct in Armstrong Creek to residential land.
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