Melbourne Greenfield Update

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1 Extract from the R4 Market Insight Report September 2017 Survey Research 4 : R4 INSIGHT REPORT

2 Extract from the R4 Market Insight Report September 2017 Survey We understand Australia s Residential Greenfield Market. Research4 undertake detailed research that focuses on better understanding the Australian residential Greenfield market. Research4 data and analytics underpin a range of third party research programs; private sector land supply programs, state government planning programs, industry state of the market reports and various Developer in-house research and analytics programs. Research4 produce an array of market performance reports, data packs and undertake bespoke consulting pertaining to the Australian Greenfield market. Colin Keane Director of Research4 colin.keane@researchfour.com Keep updated Connect through LinkedIn Research 4 : R4 INSIGHT REPORT

3 The Melbourne Greenfield market is doing ok! This is due largely to the fact that Melbourne has been able to hold its high share of Net Overseas Migration. Melbourne has been able to attract 33% of the nations total imported population growth. The March quarter saw 28,000 persons arrive from overseas into metro Melbourne. The March quarter inflow is the highest since % of National NOM 40% 35% 30% 25% 20% 15% 10% 5% 0% Share of NOM by quarter [Department of Immigration & Boarder Protection, Research4] Q Q Q Q Q Q Q Q Q Q Q Q When it comes to Net Interstate Migration or NIM, Melbourne has been able to attract a significant number of people from other states. The NIM number is the one which is likely to be pushing the land market over the top, with respect to sales. The drivers of underlying demand remain strong for Melbourne, albeit they are unlikely to push higher. Persons NIM by quarter [ABS, Research4] Q Q Q Q Q Q Q Q Q Q Q Q Research 4 : R4 INSIGHT REPORT

4 This chart brings together actual Greenfield land sales for all of Melbourne and Modelled demand for new land and a 3 year forecast. The modelled demand line is based on population drivers. Modelled demand generally lags expressed demand due to issues around arriving in a place and buying property. Land per month Greenfield Demand, Modelled, Actual & Forecast [Research4] The forecast for new land sales is based on a moderation in Melbourne s population drivers. It is assumed that Melbourne is unlikely to attract a higher volume of people; especially from overseas, therefore forward demand is expected to contract back to 1,600 lot sales per month. When? Maybe soon! The forecast is based on extending the modelling using the NOM forecasts set out by the Commonwealth. Actual & Forecast Land Sales R4 Modelled Demand Research 4 : R4 INSIGHT REPORT

5 The September 17 results for Melbourne Greenfield highlight the impact record levels of demand are now having on stock and pricing. Total net sales for the quarter fell slightly, from 2,148 down to 2,000. The fall in sales was due to a contraction in stock. The stock profile is unhealthy. Currently the entire Melbourne market has around 800 lots ready for sale or 12 days of trading. The collapse in stock levels has been driven by a slow shut down of trading estates. The shutting down is driven by a combination of factors; fear of ever expanding title dates, speculation by end users, government paper work and also a realisation that it is very hard to get replacement projects. Production levels remain high, however the market is unable to push production any higher. We are yet to see this pressure translate into smaller lots. The median lot size has fallen, however it remains just above 400m2. for the market to transition successfully from detached to attached housing product on the fringe, the supporting value per sqm rate needs to be closer to $1,500. Currently the rate is $700 per sqm. Pricing is on the move, with some sub markets now over valued while others still represent good value. The headline land price of $290,000 is in line with the broader established housing market price points. Prices up 5% Sales down 7% Stock down 22% Production down 4% Capacity down 2% Demand still strong. Product well priced. Research 4 : R4 INSIGHT REPORT

6 R4 Market Insight Report Subscribe to R4 s Market Insight Report. Next Publication, 10 th of November Research4 s R4 Market Insight Report is published quarterly. The report brings together R4 s in-depth knowledge of the major Greenfield markets, proprietary data sets and demand modelling. The report is an in-depth commentary on the nations major greenfield land markets across Australia. There is a R4 Market Insight report for Perth, Melbourne, Adelaide, South East Queensland and Sydney. Contact Research4 at research@researchfour.com to register for the latest R4 Market Insight Report. Research 4 : R4 INSIGHT REPORT