Melbourne’s broadacre land sales on its knee

Land Development Agreements potential saviours in current market cycle

Melbourne’s broadacre property market is on its knees, and a return to Land Development Agreements (LDA) is the principal method to avoid a future supply crisis, said Resi Ventures Director and founder Khurram Saeed.

He said LDAs, effectively stopped by the Victorian Government’s stamp duty changes in 2019, provided the bridge between the high price expectations of vendors and getting the market moving again by paying in stages.

“In the past 12 months we have signed LDAs for more than 2000 lots and plan to increase that pipeline by 4000-6000 lots,” Mr Saeed said.

He said Resi Ventures was securing land in metropolitan and regional areas where LDAs were welcomed by landowners and where post-pandemic demand land sales remained strong.

“The cost of development has gone through the roof, and few developers are buying broadacre land with huge upfront payments to landowners.

“This leaves the market open to Resi Venture’s Land Development Agreement model and other similar joint venture agreements,” Mr Saeed said.

“In this depressed market, no one is buying broadacre parcels as the original landowners, many of them farmers who owned the land for years, still want the heady prices of pre-2021, and the only way to achieve these prices are via a LDA,” he said.

Mr Saeed said there was a period in 2022 when investors were back in the market, enquiry levels increased, but then further interest rate hikes and Porter Davis & other builder collapses stopped the recovery.

“The broadacre market is at its lowest point in more than 20 years as a “perfect storm” engulfs the sector, fuelled by the government’s Home Builder subsidies dragging forward demand, rapidly rising interest rates, and civil construction costs going through the roof.

“Resi Ventures hasn’t purchased any land of size for a while as the feasibilities don’t stack up. However, LDA are perfect for this environment  as they get the win-win outcome both the landowners and the developers are after,” Mr Saeed said.

He said Resi Ventures latest LDA was a 1000 lot development in Echuca launching in Q4 this year.

“Overall, we are getting all of our projects to the ‘starting line’ so when the market does shift in mid to late 2024, we are ready to pounce. We are getting our ‘house in order’ and beefing up our delivery capability,” Mr Saeed said.

He said overseas migration was the key to the market recovery, but it won’t occur until mid to late 2024 as migrants secured work and saved for deposits.

Resi Ventures currently has 3000 lots with end GRV of over $900million in its development pipeline and is close to completing two 500-plus lot developments in Melbourne’s West that it started in 2016.  One of the developments, Monument, was undertaken as an LDA and has proven the model.

Its largest LDA project is the 1000 lot McMahons Place in Echuca. Generally, Resi Ventures develops land larger than 12 hectares, maximising the advantages for the broadacre landowners.