The residential development site market’s performance is shaped by various factors that impact land value and market activity.

The most influential of these is the volume of retail lots being sold across new communities. The faster homebuyers absorb available lots, the more active developers become in replenishing their future pipeline.

Since 2012, Melbourne and Geelong’s greenfield corridors have experienced two notable market peaks, each with distinct characteristics.

Leading up to the 2016/17 peak, PSP-approved land values steadily rose to an average of around $1.5 million per hectare. At the peak, cash deals dominated the market, with record rates achieved on short settlement terms.

Meanwhile, cheaper, non-PSP approved land was popular among speculators who purchased it at a lower cost, flipping it for profit as the market improved.

In 2017, the volume of these non-PSP-approved land sales eclipsed PSP approved sales by around 25%.

During the 2020/22 peak, developers dominated the market, with PSP-approved site sales more than doubling those for non-PSP-approved sites.

The approved sites’ value surged to an average of $2.4 million per hectare, while non-approved sites reached $1.8 million per hectare – reflecting developers’ eagerness to secure longer term land for future projects.

Since mid-2022, however, the market has seen a significant drop in transaction volumes. This slowdown, influenced in part by a sluggish retail sales market, has been intensified by the shortage of available land.

Most PSP-approved land is now developer owned, creating high competition for quality opportunities, which still command record rates. Additionally, the State Government’s decision to delay future PSP rollouts has reduced non-PSP-approved land acquisitions, with sales in those areas occurring mainly when vendors are willing to offer longer settlement terms.

Historically, slowdowns in retail sales phases have presented some of the best buying opportunities in the development site market. With Victoria’s land market fundamentals remaining strong and a scarcity of quality sites available, now is an opportune time for vendors to capitalise on years of strong growth and for developers to acquire land under advantageous terms.

This article references findings from our Q2 2024 Victoria Greenfield Market Report.