The final quarter of 2024 showed signs of recovery in Melbourne and Geelong’s growth areas, with sales activity rising 20% year on year. While this suggests improving buyer sentiment, the momentum has been inconsistent. Month on month sales have softened, and affordability remains a significant hurdle.  

Affordability pressures persist 

While construction costs have stabilised, they remain elevated, placing ongoing strain on both developers and buyers. Government grants and developer-led incentives have played a crucial role in sustaining demand, with titled land being the primary beneficiary – accounting for nearly 60% of total Q4 sales.  

However, even with these incentives, titled lots have lingered on the market longer than ever, with the average time on market reaching a record 186 days.  

Prices edge higher despite market challenges 

Despite subdued sales, the median lot price rose 2.4% in Q4, surpassing $400,000. This increase is largely due to shifting buyer demographics and higher sales volumes in premium-priced areas.  

Upgraders and downsizers – who generally have greater financial flexibility – are becoming more dominant in the market, outnumbering first home buyers. Their presence is pushing prices higher, though rebates and discounts continue to offset some of this upward pressure.  

The south east corridor, where land prices are higher, has gained a greater share of total sales, naturally lifting the overall median price. Meanwhile, the western corridor continues to face affordability constraints, limiting buyer activity.  

Regional markets show stronger recovery 

Regional Victoria has seen a more pronounced recovery, with rising sales activity and new land releases. Developers are responding to growing demand, and regional areas continue to offer a more affordable alternative to metropolitan markets.  

Greenfield townhomes are also gaining traction, emerging as a strong investment option with appealing yields and long term growth potential.  

The road ahead: interest rates and market outlook  

Victoria’s land market outlook remains cautiously optimistic. While the February rate cut is expected to improve consumer confidence, sustained sales growth will likely require multiple rate reductions.  

By mid-2026, interest rates could drop by up to 1%, increasing borrowing capacity by approximately 10%. For example, a household earning $120,000 could afford to borrow an additional $60,000 – though this remains well below 2022 levels.  

This article references findings from our Q4 2024 VIC Greenfield Market Report. Read the full report here.