We are experiencing record sales across the residential land sector and there is no sign of it easing anytime soon.
There continues to be more potential purchasers than there are lots of land coming onto the market and this creates several dilemmas for those wanting to buy. Given the above, it is important that we review two of the main dilemmas at hand:
Firstly, prices around the perimeter of metropolitan Melbourne are continuing to climb. Will this stop? We are already seeing some areas where prices may have reached their peak. There comes a point in every location when prices cannot go any further, so they either stabilize or continue climbing at a slower rate. Some areas have simply been pushed too hard and prospective purchasers have chosen to look further out of Melbourne. If we look at areas such as Rockbank, prices have risen to a point that exceeds the budget of most first home buyers, so they have moved their focus to other outer areas such as Melton and Bacchus Marsh, which are now experiencing record land sales.
Secondly, when is the right time for a purchaser to commit to buying a new home? This is difficult because we are now seeing people who purchased their land 12 to 18 months ago experiencing further delays waiting for their land to be developed and titled. This creates a butterfly effect, given the fact that the builders have to increase the price of their product range to accommodate a multitude of factors, which leaves the client wearing the cost while they wait.
The land industry as a whole is under immense pressure due to record sales. Delivering the land titles within a reasonable timeframe becomes an almost impossible task given the aforementioned pressure placed on the industry. It is clear that the builders cannot lock in their prices for extended periods of time given the likelihood of increasing material, labour and overall operational costs.
We hear some home buyers complaining about small monthly builder increases, but what they fail to acknowledge is the amount of capital growth that has been achieved since the initial purchase. We’ve witnessed some purchasers achieve capital growth in excess of $100,000 in this time, and based on this (in my opinion) a buyer is still better off to secure the home they want early, endeavour to lock in the price of the home for as long as possible and understand how and when the increases will take place. They should then measure this information against when the land agent is telling them the land will be titled. Given the unexpected delays, buyers should then be allowing at least another 3 months on top of the anticipated title period.
Be assured the developer and the sales company are as anxious as the purchaser for titles to be provided and the property to be settled because this is when the developer and sales company receive remuneration. The development industry will continue to be under pressure to perform and deliver titles within a reasonable period for some time to come.
Purchasers need to be conscious that there can be unavoidable delays in these buoyant times, which could lead to certain inconveniences and that it’s is best to prepare for such things where possible.