Melbourne first-home buyers forced to the fringe after being priced out

Rising house prices are dashing the dreams of frustrated buyers, forcing them to the outer edges.

Pushed out of Melbourne’s property market, they’re concentrating their ambitions in areas such as Point Cook, Mernda and Craigieburn. 

The demand for vacant land has also been buoyed by government incentives such as the $10,000 first home owner grant for purchase or construction of new homes. 

And it appears house blocks at Point Cook, about 25 kilometres south-west of the CBD, have been the most sought-after in the second half of 2014.

Domain Group data shows a slice of the suburb costs $558 per square metre, the priciest of the top 10 most popular areas for vacant land, where a typical allotment would set buyers back by $270,000.

Despite a cheaper median price per square metre at $470 and an average land price of $189,000, Tarneit in the outer west is in less demand.

Domain Group senior economist Andrew Wilson said the outer-suburban fringe was a starting point for many buyers, but it was clear people were prepared to pay a premium for location.

“These are broadacre subdivisions…the traditional first rung on the property ladder in Melbourne for first-home buyers,” he said. 

“It is all part of that gentrification of the western suburbs, and another facet that is making this area an increasing destination for buyers.” 

Melvin Kho, 30, and wife Sasha, are making the big move from Wantirna South to Point Cook to get a foothold on the property ladder. 

The couple recently bought a 572-square-metre block for $280,000 in the Paragon estate and have plans to build a four-bedroom house for the family they plan. 

Mr Kho said the south-eastern suburbs were too pricey for the couple and they were able to get more bang for their buck in Point Cook. 

“Everyone wants to build their dream home,” the quality assurance consultant said.

“There’s a lot of young families [in Point Cook]…and we felt safe in the environment.”

Paragon’s land estate manager, Bill Zaikis, said most of his clients were white-collar workers from the inner-city, eastern and south-eastern suburbs who travelled to the CBD for work. 

He said there was also strong interest in Point Cook from international buyers because of the effective marketing of Sanctuary Lakes to the overseas market.  

New builds as opposed to established homes, he said, also gave budget-conscious buyers flexibility to build a smaller house on a smaller block, and buyers priced out of Point Cook would then look at land in Truganina and Tarneit. 

In addition to the lure of affordability, local agents said the first home owners grant for new homes had also driven land sales in the area. 

LJ Hooker Point Cook principal Paul Caine estimates that about 75 to 80 per cent of his vacant land sales were to first home buyers. 

“The land is getting smaller so it is attracting the younger buyers, but traditionally it is a family-oriented area,” he said.  

It’s a similar story in the north-east, where local agents selling land in Mernda, Doreen and Wollert say the majority of land sales were also to buyers looking for their first home as well as to young families from the northern suburbs. 

Ben Pellicori of Ray White Epping said Doreen was popular because of its proximity to good schools, including the Ivanhoe Grammar Plenty campus, and there was also more infrastructure being built in the area. 

“Now interest rates are at a good level [and] people who are budget conscious can afford to buy again,” he added. 

But Mr Pellicori said the capital growth of the blocks wasn’t as strong as inner-city property because of the ample supply. 

Among the most popular areas for house blocks, buyers would get the most value for their dollar in Pakenham, where land is priced at just $395 per square metre. 

Dr Wilson said Melbourne was the capital city for house and apartment building, with figures from the Australian Bureau of Statistics indicating that about 30 per cent of all houses constructed in Australia’s capital cities were built in Melbourne.