Massive injection of new land for houses on Melbourne's fringe

Huge parcels of land will be released in Melbourne for residential housing developments on a host of outer suburban sites.

Aerial shots of a developing housing estate in the outer suburbs of Melbourne, Australia.
A huge influx of new houses is expected in Melbourne's outer fringes with the release of 27 additional greenfield areas. (Image source: Shutterstock.com)

Melbourne’s housing market has received the biggest injection of new land for suburban expansion in decades.

The Victorian Government on Wednesday (23 October) announced that it was unlocking a decade-long pipeline of new home building sites.

The landmark plan allows for 27 additional greenfield areas across Melbourne’s outer south-east, north, and west to be released over the next 10 years – committing to providing the space and completing the planning work to deliver 180,000 new homes over the decade.

 The first three greenfield plans set to be released in 2024-25 include:

  • Northern Freight Precinct, an employment precinct in Whittlesea Council, in northern Melbourne
  • Creek South Part 2, a residential precinct in Cardinia Council, in southeast Melbourne
  • Kororoit Part 2, the western corridor within Melton Council adjacent to Caroline Springs, outer west Melbourne.

While the plan is sure to raise concerns among environmentalists concerned about continued urban sprawl, the government has tried to allay some of those concerns.

“The structure planning process will ensure these areas are well prepared for development, with the release of unzoned land sequenced to align with the provision of infrastructure and community needs so that new communities are liveable, green and adequately serviced,” Victorian Premier Jacinta Allan said.

The government noted that for the last 30 years, greenfield areas have shouldered a disproportionate amount of Melbourne’s growth. Homes in well-serviced council areas like Boroondara, incorporating affluent suburbs such as Hawthorn, Camberwell, Kew and Glen Iris, have only grown 24 per cent since 1994 while Wyndham Vale on Melbourne’s western perimeter grew 439 per cent over the same time.

“The 10-year plan will turn the tide and help realise the Government’s vision of 70 per cent of homes in Melbourne going in inner and established areas, with 30 per cent going in outer-suburban ‘greenfield’ areas – instead of the other way around,” Minister for Planning and Suburbs, Sonya Kilkenny, said.

“This plan provides the space and the planning work for that 30 per cent.

“At the same time, the Government’s plans to build more homes in inner-suburban areas close to transport, services and jobs – particularly around more than 50 activity centres – will help deliver hundreds of thousands of additional homes in established areas.

“This is all about providing choice and getting the balance right between development in the outer suburbs and development in the inner city — for too long, that’s been too one-sided.”

Many new outer suburbs have long been maligned for lacking public transport and other crucial infrastructure components.

The Government has tacitly acknowledged that, saying it will improve the planning system to make life easier for builders. From 1 January 2025, the Victorian Planning Authority will be integrated with the Department of Transport and Planning.

The four major components of Victoria’s planning system – strategic, transport, statutory and spatial – will now be expected to work together “to cut delays and duplication and deliver faster and better structure planning”.

Melbourne’s stagnating market

Investors have been shunning Melbourne property, with its rent yield of 3.7 per cent only surpassing Sydney’s 3.0 per cent and property prices in retreat after a lengthy period of stagnation.

The flood of new supply into the outer areas of Melbourne will be great news for young families and first home buyers, as will big reductions to off-the-plan stamp duty levies.

Six of the top seven areas in Melbourne for property price growth are located in outer Melbourne but are recording anaemic annual growth of just 0.9 to 1.9 per cent.

If prices here are suppressed further, Melbourne’s overall capital growth performance will slide more and provide another headlining deterrent to investors.

Kelly Ryan, CEO, Real Estate Institute of Victoria (REIV) told API Magazine that it was critical that a sufficient variety of new homes were delivered to meet Victorians’ diverse living arrangements, demographics, cultural backgrounds, lifestyles, budgets and preferences.

“This includes the creation of both high- and low-density homes across metropolitan and regional Victoria,” Ms Ryan said.

“We’re pleased the Victorian Government has upheld this diversity principle with its plans to establish greenfield house developments in 27 areas of Melbourne in addition to previously announced measures for high-density housing.

“In combination, these two initiatives will give Victorians greater choice in finding a property that meets their needs.

“While the planning stage is important in building more homes, the REIV has recommended that the Victorian Government introduces measures to attract private investment into our state’s property sector.

“Private capital will be critical to building and sustained this pipeline of new homes in the decade to come.”

Melbourne might still be overpriced

Despite Melbourne’s median property price slipping to sixth among capital cities, above only Darwin and Hobart, when income levels are factored in the city remains among the most expensive in the world.

Australia’s home price-to-income ratio is at 9.6 times, at the high end of the range relative to international peers, and nearly double its level in early 2000.

Diana Mousina, Deputy Chief Economist, AMP, said that when looking at home price-to-income ratios by capital cities, on a capital city basis, Sydney ranks among some of the most expensive cities in the world (with a price-to-income ratio of 12.8) but Melbourne, along with Brisbane, was not far behind.

“While this can be ‘justified’ as Sydney is now a major global hub, Brisbane and Melbourne are not far behind in rankings and regional price-to-income ratios are also very elevated, which shows that the problem is not just in the capital cities,” she said.

“The problem for Australia is that 48 per cent of the population reside in just three capital cities (Sydney, Melbourne and Brisbane), which arguably makes the affordability problem worse in Australia, because there are less affordable markets to pick from.”

Around 63 per cent of Australians own a home, either outright or with a mortgage. This is towards the lower end of the range across comparable OECD countries.

“Australia’s relatively lower homeownership rate is one sign of the housing affordability problem,” Ms Mousina said.

“Other metrics show a similar issue, with Australia’s household debt-to-income levels at a record high at 214 per cent and above global peers.”

Article Q&A

Is new housing land being released in Victoria?

The Victorian Government on 23 October 2024 announced that it was unlocking a decade-long pipeline of new home building sites. The plan allows for 27 additional greenfield areas across Melbourne’s outer south-east, north, and west to be released over the next 10 years.

Are property investors active in Melbourne?

Investors have been shunning Melbourne property, with its rent yield of 3.7 per cent only surpassing Sydney’s 3.0 per cent and property prices in retreat after a lengthy period of stagnation.

How does Australian property affordability compare to other countries?

Australia’s home price-to-income ratio is at 9.6 times, at the high end of the range relative to international peers, and nearly double its level in early 2000.

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