Victorian Lot Costs Fall, but Developers Warned Not to Bank on it

Melbourne’s greenfield land market has recorded its strongest sales result in three years, yet the cost of bringing new lots to market is forecast to rise again within two years. The average cost per lot dropped 4.3 per cent year-on-year to $126,811 in 2025, down from $132,535 in 2024, driven by a more competitive contractor market. Internal civil costs drove most of the reduction, falling from approximately $69,400 to $64,700 per lot as construction demand eased and contractor competition intensified. Statutory charges and planning bottlenecks are forecast to push that figure back towards $134,000 by the 2027 financial year, according to the Colliers Engineering &amp; Design 2026 Cost Per Lot Report. Statutory fees now account for more than $51,000 per lot—around 40 per cent of total development costs. Planning-related charges, rather than utility costs, have driven most of the increase, according to Colliers director of strategic development Chris Gallaugher. Electricity, water and sewer charges have remained relatively stable under Essential Services Commission regulation, he says. “The major increases have come from Infrastructure Contributions Plans and Development Contributions Plans, which are indexed annually to construction costs and land acquisition values,” Gallaugher tells The Urban Developer . Melbourne Water charges have added further pressure. After holding broadly flat for several years, funding shortfalls across several schemes prompted a review of charge estimates on a scheme-by-scheme basis. Some charges rose by more than 20 per cent last year, with annual increases capped at 25 per cent. Without changes to how charges are indexed, meaningful relief is unlikely in the near term, Gallaugher says. ▲ Colliers director of strategic development Chris Gallaugher. Subgrade conditions widen corridor cost gap Cost differences across Melbourne’s growth corridors are widening. Average per-lot costs range from $112,424 in Greater Geelong to $135,767 in Cardinia, with Hume, Whittlesea and Mitchell all sitting above the 2025 average, according to the report. Rocky subgrades in the city’s north and west push drainage, sewer and earthworks budgets up by around 20 per cent compared to the clay-based conditions found in the southeast. Greater Geelong and Wyndham are well below the average, according to the report, with Wyndham’s lower costs reflecting more established trunk infrastructure across several PSPs. Melton also recorded a year-on-year reduction, supported by higher development densities that dilute per-lot infrastructure and authority costs. Experienced developers typically price in rock as a default in these corridors unless site conditions have been proven otherwise, Gallaugher says. Detailed geotechnical investigations are rarely commissioned during early due diligence unless a known risk is present—such as a former dam infill or evidence of prior bulk earthworks. “For well-located sites, there is often at least one buyer willing to proceed unconditionally and absorb that risk,” Gallaugher says, “which limits how much geotechnical uncertainty is reflected in land pricing.” Precinct Structure Plan sequencing adds risk Downstream drainage approvals—outfall consents and shared infrastructure outside a site’s boundary—represent the most consistent constraint, capable of stalling projects even where zoning and permits are in order. Cultural Heritage Management Plan requirements often overlap with drainage issues, as waterways and creek corridors tend to carry higher cultural sensitivity. Transport sequencing can also impose hard limits, with lot caps in areas such as Wollert tied to the delivery of broader road infrastructure. Upfront engineering assessments covering best-case, average and worst-case timing and cost scenarios are essential for managing these risks, Gallaugher says, along with conditional contracts tied to drainage or heritage approvals. “Any site can be a good site if it is acquired on the right terms,” he says. “Minimising both time and capital exposure depends on strong engineering, planning discipline and targeted due diligence from the outset.” ▲ Colliers national director, land marketing Terry Portelli. Greenfield demand hits three-year high Melbourne’s greenfield land market recorded its strongest performance since 2022, with annual sales rising 40 per cent year-on-year to approximately 8100 lots in 2025, according to Colliers research. Despite this improvement, demand remains concentrated in a specific price bracket, Colliers national director, land marketing Terry Portelli says. Demand is strongest in the $650,000 to $750,000 range, where buyers can obtain finance and make the numbers work, Portelli tells The Urban Developer , with northern and western corridors recording the most activity as they remain the most price accessible. Titled-lot availability is tightening, pushing more buyers towards off-the-plan purchases, though with greater scrutiny around delivery timeframes and track record. Portelli says buyers will accept longer settlement periods, but only where there is transparency. Buyers are increasingly focused on who they are dealing with, he says, with confidence around delivery timing and track record becoming a deciding factor alongside product and price. “As soon as there’s uncertainty around delivery, that’s where you start to lose them,” he says. Population growth is sustaining underlying demand, but supply cannot respond quickly enough to close the structural gap, Portelli says. Feasibility has a hard ceiling under current conditions. Once land costs exceed 30 to 35 per cent of end value, Portelli says, projects become very hard to make viable—borrowing capacity is effectively capping where retail pricing can go. “What we’re seeing is a real shift back to fundamentals: disciplined buying, tight product and ensuring delivery into the right price point,” he says. Macroeconomic headwinds add to uncertainty Near-term costs are already trending towards approximately $128,000 per lot across core metro markets before the forecast 2027 financial year rise, according to the report, driven by fuel shortages and supply chain disruption expected to push civil construction prices up by around 8 per cent. ▲ Concrete pipe supply constraints and fuel surcharges are pushing construction costs higher. Contractors are already reporting acute pressure across key materials. Street Works Civil Contractors project manager Steve Williams says concrete pipe supply is tightening, with 20-week lead times returning and volumes being diverted interstate. Many suppliers have flagged price increases of 15 to 25 per cent. Lojac Civil project engineer Chris Wheeler says fuel costs are rising and suppliers are regularly flagging price increases across key materials, making it difficult to predict near-term costs. Montdami director Sam D’Amico says fuel costs are driving up the price of core civil materials, with concrete up around 15 per cent since the start of 2026, fuel surcharges of around 20 per cent on concrete pipe deliveries and quarry product delivery surcharges of around 30 per cent. Rising interest rates and labour constraints compound the pressure, D’Amico says, pointing to a likely 5 to 10 per cent increase in civil construction costs through 2026. Groups that focus on delivery fundamentals will be better placed than those trying to time the market, Portelli says. With costs forecast to rise regardless of short-term construction relief, the gap between demand strength and delivery capacity looks set to define Victoria’s greenfield market through the remainder of the decade. “It’s less about trying to catch the market and more about getting the basics right,” Portelli says.

Victorian Lot Costs Fall, but Developers Warned Not to Bank on it

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