Favourable purchasing conditions that emerged this quarter are likely to boost buyer confidence heading into 2025. Mid-year tax cuts have strengthened borrowing power, and with inflation easing, households are finally feeling more breathing room in their budgets. This combination has helped improve sentiment, creating an optimistic outlook.  

While lot sales picked up in August and September, we may not see substantial growth until the anticipated rate cut cycle begins in early 2025.For now, buyers have plenty of options, with the secondary market offering discounted vacant lots that are often priced lower than new developer lots.  

While borrowing power has improved, building costs remain high which is challenging new home affordability compared to established homes in growth areas. In fact, Melbourne saw the land to house ratio hit 43% in Q3; to counter this we can expect the continuation of rebates and incentives as sales strategies to stimulate activity and absorb titled lots.  

Affordability is becoming an even stronger driver for buyers, many of whom are opting for smaller lots and downsizing their home sizes or adjusting their dwelling type preferences. There is an increased demand for single storey homes ranging between 15sqs-25sqs, rather than larger or double-storey builds. This trend is likely to continue while construction costs remain high, even as the mix of first home buyers and upgraders stays fairly consistent.  

These shifts are also influencing design preferences. Medium density housing and innovative layouts are gaining traction, as buyers rethink traditional notions of what a home should be. With the cash rate projected to hover around 3.5% for the next decade, designs focused on clever use of space and affordability will continue to appeal to the market.  

Government initiatives, such as the Home Guarantee Scheme (HGS), are also playing a key role in driving demand. In Melbourne’s growth corridors, including Tarneit, Cragieburn, and Clyde for example, the HGS has been widely utilised, with Armstrong Creek also seeing significant uptake. For FY24/25, the federal government plans to add another 50,000 spots to the HGS, and the Victorian Government is contributing$700 million to its Homebuyer Fund. These initiatives will continue to support affordability and help more buyers secure new homes. 

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