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Strategic development opportunities arise as cost dynamics shift in Melbourne’s property market

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New findings from Colliers Engineering & Design’s latest report indicate a 3.5% increase in the average Cost Per Lot in Melbourne’s metropolitan growth areas for 2023, with figures reaching $116,582 from the previous year’s report. This increase reflects a moderating rise in development costs as the market begins to stabilize amid resolving supply chain issues and diminishing competition for construction resources among different sectors, including residential, industrial, and Victoria’s extensive Big Build initiative.

Colliers Engineering & Design have been providing Opinions of Cost for a vast array of projects since 2015, having analysed over 300,000 lots across Victoria, particularly within key growth areas such as Casey, Melton, Mitchell, Whittlesea, Cardinia, Hume, Wyndham, and Geelong. This breadth of data collection aims to offer comprehensive insights into the development landscape of these regions.

Highlighting the complexity of determining development costs, Chris Gallaugher, an expert analyst and director at Colliers Engineering & Design, pointed out the factors contributing to cost variability. “Our report highlights that the costs across municipalities vary due to a number of factors including subsurface conditions, topography, and the statutory fees and charges applicable within that council’s specific precinct structure plan,” Mr Gallaugher stated. This insight underscores the necessity for detailed analysis and expert advice during the planning stages of residential projects.

Additionally, the report offers a comparative analysis of greenfield development costs across different states, with New South Wales averaging at $170,899 per lot and Southeast Queensland at $157,833 as of May 2023. “The collation of this data by our teams across NSW, VIC, and QLD provides valuable insights into the variance in the cost of greenfield development across the states,” Mr Gallaugher mentioned, emphasizing the importance of such data in understanding regional development cost differences.

The report serves as a strategic resource for developers, councils, and authorities looking to inform their practices with up-to-date market data and analyses, fostering the opportunity for more efficient and informed decision-making.

Looking ahead, the anticipation grows for a national report expected to launch in August. This comprehensive analysis will extend beyond Victoria, encapsulating all states and offering insights into complex factors such as supply side issues of the housing market, which could significantly influence future strategic planning in the property development sector nationwide.

Source: Colliers Engineering & Design “Cost per Lot, Victoria, 2024 Report”

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