One in three Melbourne residential lots being returned to developers by building firms: report

Nearly a third of residential lots released by big land estate developers on Melbourne's fringes are being returned by mid-sized home building companies, who can't find smaller home builders and or end-use homebuyers.

The statistic has been uncovered as part of The National Land Survey Program carried out by jointly by Research Four and property consultants Charter Keck Cramer.

According to the Melbourne chapter research of the National Land Survey Program, 30% of new land activities for the September quarter were cancellations.

The September quarter figures indicate that cancellations are rising with the 12 month cancellation rate averaging 23% of monthly activity.

This compares with a cancellation rate of averaged only 4% of monthly activity during the property boom from June 2009 to December 2010.

Cancellation rates are highest in the west (Melton) and north of Melbourne (Mitchell, Hume, Whittlesea) with the south east (Cardinia, Casey) having notably lower level of cancellations relative to lot sales.

Property Observer understands that Stockland projects represents a sizeable proportion of residential land that has been returned recently.

Stockland and other residential developers sell blocks of residential land in new master-planned communities to home building companies, which then market house and land packages at buyers.

The latest report provides further evidence of the challenges facing Melbourne greenfield land developers and comes as the HIA recorded a 12.1% fall in detached new home sales in Victoria over October.

Colin Keane, director of Research Four and the National Land Survey, says the current “slump in form for the Melbourne Greenfield market has not been helped by a rise in the number of blocks of land being handed back to developers".

"Builders are unable to carry or sell on vacant land at the level which they experienced during the property boom. This situation has not been helped by a shift of first home buyer demand back to established property over new house and land."

In addition, first-home buyers don’t have the added incentive of the $13,000 state government handout, available for new home purchases, which ended in June.

Rory Costelloe, of Villawood Properties told Fairfax that developers that required buyers to put down only a small holding deposit of just $500 or $1000 on a residential block were the “really experiencing the problem”.

“This situation could market the beginning of a more conservative relationship between builder and developer as both struggle with lifting activity,” Keane says.

According to the September quarter Melbourne land report prepared by Oliver Hume, in terms of the 139 residential projects in Melbourne, Wyndham contains 24% of all projects, followed by Whittlesea and Casey with 22% and 17% respectively.