Vacant land sales continue to slow down across the country following a period of record high demand according to the latest Herron Todd White (HTW) Month in Review.
In the August report, HTW National Director of Residential, Ben Esau said transactions of vacant land peaked in August 2020 before trending back down through to February 2021.
Activity is likely to continue to slow gently as interest rates rise and sentiment remains lower than at the height of the property boom.
Mr Esau said there were three primary factors influencing sentiment in land markets right now.
“The first is the length of time it’s taking to get new builds completed,” Mr Esau said.
“The second is continued supply chain challenges, which are creating uncertainty on labour, materials, pricing and delivery.
“Finally, there’s interest rates and where they’re likely to land.”
According to Mr Esau, near city vacant land, which is generally created via sub-dividable blocks, was still seeing solid interest from buyers.
“Given all the above factors around construction delays and costs, many small developers are electing to put projects on hold – particularly if the in-fill site includes a rentable home,” he said.
“This also means sub-dividable sites with an existing house can achieve a price premium above purely vacant sub-dividable land.
“Overall, I believe spring 2022 will be an important period in gauging the confidence of buyers and sellers as we all settle into our financial new normal and property transactions hopefully return to long-term averages.”
Sydney
HTW Director Shaun Thomas said across Sydney the majority of vacant land activity was on the city-fringe.
“The vacant land market, particularly in the growth centres of western Sydney, has been through a period of tremendous growth over the past two years, however there are headwinds that have recently hit, including interest rate increases along with escalating build costs, which are likely to take the remaining heat out of this market,” Mr Thomas said.
Mr Thomas said vacant land prices had seen sharp rises across southwest Sydney.
“The past 12 months has seen a continuation of the previous 12 months where we have seen a significant and continuous growth in vacant land values across all areas of the south-western Sydney market,” he said.
“The entry point for this market has moved from $400,000 to $600,000-plus for your standard 300sq m site.”
According to Mr Thomas, demand for residential land in Western Sydney in the past 12 months has remained strong, with the wider demand for new housing and the general value increases in the inner suburbs having pushed buyers further west into the growth corridors.
Melbourne
HTW Director Perron King said rising interest rates, inflation, supply interruptions and the end of pandemic-era government grants had dampened supply and demand for vacant land across Melbourne.
Mr King said the western suburbs were in the top place on savvy purchasers’ lists due to the government investing billions of dollars in infrastructure, roads and railways to better connect the outer west to the CBD.
“Taking a closer look at the current vacant land market in the Tarneit and Truganina area alone, we are able to see that there are over 700 vacant lots for sale in this current market,” Mr King said.
“On offer, there are a range of different land sizes available at all different price points ranging from $280,000 to $500,000 for the land alone.
“In saying this, there is buyer caution at the moment, with the increased stress on the construction industry due to inflated build and labour costs causing many people to think twice whether they really want to start fresh on newly cut land or buy an existing home.
“This raises concern for developers that they may face an oversupply of vacant land sites all within close proximity of each other.”
Brisbane
HTW Director David Notley said across Brisbane, rising rates had slowed activity more generally but the biggest impact on the land market appeared to be construction cost increases.
Labour and materials are becoming unjustifiably expensive and the wait time for both has blown out phenomenally according to Mr Notley.
“There’s qualitative evidence that owners are putting off building new and instead looking to purchase established homes or just sitting tight and waiting,” Mr Notley said.
“The locations where most vacant land is available include Spring Mountain, Logan Reserve and Rochedale.
“These growth zones have gained popularity and while prices have increased, they remain relatively affordable compared to other addresses.”
Mr Notley said the northern development corridor was delivering a mixed bag performance-wise.
“Estates on the fringe of our service area have seen a slowdown,” he said.
“These are traditional size blocks in our most affordable suburbs such as Morayfield and Burpengary.
“They are mostly located in large master planned subdivisions with prices of $275,000 to $360,000 for a 400sq m site.
“Sales agents advise that during the peak of activity, they could sell out a new stage in most developments within 24 hours.
“That same volume is now taking closer to a month to sell out.”
Adelaide
HTW Property Valuer Nick Smerdon said the Adelaide land market continued to hold firm.
“The market for vacant land has been resilient, with price levels and demand stabilising in the first half of 2022 as the intrinsically linked building industry faced challenges,” Mr Smerdon said.
“An abundance of land remains available in the established metropolitan areas as well as suburban subdivisions and outer greenfield developments.”
Mr Smerdon said the largest proportion of vacant land could be found in master planned subdivisions.
“Examples of these developments include Northridge in the suburb of Enfield, north of the CBD and Hamilton Hill in the suburb of Woodforde, east of the CBD.
“Allotment sizes begin at 100sq m for townhouse style allotments and reach a ceiling of 600sq m for traditional detached dwelling lots.
“Price points vary broadly from location to location with allotments ranging in price from $140,000 to $450,000.”
Perth
HTW Director Chris Hinchliffe said vacant land sales had slowed in the most recent quarter.
“REIWA’s statistics for the January to March 2022 quarter show that Perth metropolitan land sales have had a slow start to 2022, achieving only 863 sales in comparison to 2864 in the quarter ending March 2021,” Mr Hinchliffe said.
“The number of sales is also lower than pre-pandemic levels which achieved 1576 and 1323 sales respectively in the March 2018 and 2019 quarters.”
Mr Hinchliffe said Western Australia recorded one of the highest construction cost escalations with a 7.9 per cent increase at the end of 2021 and 13.2 per cent of lots were returned to the market by potential buyers in the same year, indicating that there was already some level of uncertainty from the land end users.
Alkimos, Brabham, Hammond Park, Treeby and Wandi continue to be popular locations for vacant land sales Mr Hinchliffe said.
Darwin
HTW Valuer Cameron McDonell said when comparing vacant land to what you get for an established home in a similar location, the new build price stacks up as good value across Darwin, even when taking into account the rising costs of construction.
“There are three master planned communities in which someone can look to purchase land in Darwin: Lee Point, Northcrest, and Zuccoli,” Mr McDonell said.
“All three suburbs offer the purchaser something different, with Lee Point a premium beachside location and Zuccoli a more affordable option.
“All developers are producing allotments of similar size with the vast majority of land being developed coming in at 400 to 500sq m.
“Pricing across these three different master communities varies from circa $400sq m in Zuccoli to circa $650sq m at Lee Point, with Northcrest sitting in the middle at circa $550sq m.”
Canberra
HTW Assistant Property Valuer Nicole Claughton said vacant land in Canberra had been scarce for a while, with land releases minimal due to more areas in Canberra becoming established.
“This is due to land in established areas being hard to come by as most established areas have dwellings already built with many of those properties either being renovated or knocked down and rebuilt,” Ms Claughton said.
“When land releases do occur, they are highly popular, with people registering their interest as quickly as possible.
“The Canberra Times said that when land in Macnamara was released earlier in the year, almost 1000 people had registered their interest in the first blocks.
“Prices for the blocks of land started at $377,900 for a 350sq m lot with the highest price being $763,600 for the largest block at 935sq m.”
