While the economic outlook is likely to improve in 2025, regional areas face ongoing challenges in construction. Higher building costs compared to metropolitan Melbourne and a shortage of skilled tradespeople will persist. Without adjustments to land prices, affordable house and land packages may remain out of reach for many buyers. 

The coming months will see demand for regional areas stabilise at a more balanced level. The gradual shift to return to office (RTO) may influence the decisions of buyers who had previously chosen a tree-change lifestyle accommodated by hybrid workplace arrangements. This adjustment may lead to a more selective demand for regional properties, especially as commuting considerations and lifestyle preferences shift in response to workplace trends.  

Despite these changes, regional property demand is anticipated to remain robust, provided it aligns with affordability. The key for developers will be to offer lots that meet buyer expectations in terms of price and size, with pricing positioned as a priority. 

Smaller than traditional lots may increasingly appeal to prospective buyers as they look for more attainable options in the current cost of living crisis. This strategy is particularly important in light of the established property market, which has largely plateaued within the current cycle. 

However, market activity will likely hinge on broader economic factors – specifically, interest rates. Until there is a sustained period of interest rate cuts, purchasing power will remain constrained, making price reductions and other incentives essential for driving transactions. The first interest rate reduction is anticipated in Q12025, but meaningful impacts on buyer capacity may not materialise until later in the year.  

Buyers hold a notable advantage, with opportunities to negotiate favourable terms with developers. This leverage underscores the importance for developers to remain responsive to market expectations, adjusting offerings to align with the financial realities and preferences of today’s buyers. 

This article references findings from our Q3 2024 Victoria Greenfield Market Report. Read the full report here.