Melbourne’s Land Market in 2025: What It Means For Your Dream Home
- Carmel Homes
- Aug 8
- 6 min read
Updated: Aug 14
Written by Adib Adely, Director of Carmel Homes
Based on the HIA–Cotality Residential Land Report, March 2025 Quarter
If you’ve started exploring land for a new home in Melbourne lately, you’ve probably noticed just how much the market has changed, even compared to just a couple of years ago. We’re talking higher prices, smaller blocks, and a process that can feel like running a marathon just to get your plans approved. It’s a lot to wrap your head around, especially if you’re dreaming of something a little more special, maybe a custom home, something modern, or a complete knockdown-rebuild.
We’re right in the thick of it every day, so here’s a breakdown of what’s actually happening out there, using the numbers from the latest HIA–Cotality Residential Land Report. We’re keeping it Melbourne-specific, since that’s where our clients are, and honestly, it’s a different beast to anywhere else in the country.
The Big Picture: Land in Melbourne Is Scarce, and It’s Not Getting Cheaper
Let’s cut straight to it: finding good land in Melbourne is tough, and if you do find it, you’ll pay a premium. The median price for a block of land in Greater Melbourne is sitting at $400,000 right now. That number has basically flatlined for the last couple of years, but don’t be fooled—just ten years ago, that same patch of dirt would’ve set you back around $216,000.
That’s an 85% jump in a decade. Most of us don’t see our pay go up by that much, but land sure has.
For anyone thinking about a luxury build, this isn’t just a fun fact, it’s the first, unavoidable reality. Your land is probably going to be your biggest single investment. But if you’re building something special, the upside is that the value tends to stick around, even if the market cools off.
So, Why Are Sales So Slow?
If you’ve been to a handful of auctions and felt like you’re seeing the same tired faces, you’re not imagining things. Land sales have been really low in Melbourne, some of the lowest numbers in decades. The report basically says Melbourne and Sydney are neck-and-neck as the least affordable places to buy land in the country.
The low number of sales isn’t just because people don’t want to move. There’s simply not a lot on offer. Developers are releasing fewer lots, councils are slow to approve new ones, and anything that does come up gets snapped up, often for more than you’d hope.
So if you find something that ticks your boxes - size, location, orientation - move quickly, but also go in with your eyes open. A “wait and see” approach doesn’t work in this market.
Blocks Are Shrinking—Fast
Maybe you remember bigger yards growing up, or you’re scrolling through old property listings thinking, “Did blocks really used to be that big?” You’re not imagining things. According to the report, the median lot size in Melbourne has shrunk to 388 square metres. That’s down almost 10% from 2015, and a whopping 35% from 20 years ago.
What does this actually mean for your build? Basically, the days of sprawling backyards and side access are over, unless you’ve got a seriously big budget. Designers (ourselves included) have had to get way more creative. Multi-storey homes, open-plan living, clever use of courtyards and rooftop spaces, these aren’t simply just architectural trends, they’re practical solutions to a market reality.
This is also where custom design shines. Volume builders do a great job with “one size fits most,” but if you want every inch to work for you, getting something tailored just makes sense.
Price Per Square Metre: Every Bit Counts
For most people, “price per square metre” sounds like agent-speak, but it’s worth paying attention to. Right now, the median price per square metre for Melbourne land is $1,066. That puts us right behind Sydney (as usual) but ahead of just about everywhere else.
This has a couple of implications. First, you want every square metre to work for you, wasted space is just wasted money. Second, higher land value usually means higher potential resale value, especially if your home is designed to make the most of the space.
And when we’re drawing up concepts for clients, this stat is never far from our minds. It’s about packing value into every inch, whether it’s with built-in joinery, smart storage, or layouts that make even a smaller block feel open and luxurious.
Planning Approval: The Hidden Cost Most People Forget
Here’s something you won’t see on a listing: Victoria has the highest planning approval costs and the slowest process in Australia. On average, expect to spend nearly $20,000 and wait more than 7 months for a planning approval.
Yep, you read that right. Almost twenty grand, and over half a year before you can even think about breaking ground.
Why? Layers of planning overlays (think: heritage, flood, environmental), councils stretched thin, and endless requests for more info, new reports, revised drawings. If you’ve built before and felt like you were jumping through hoops, it wasn’t just you.
For anyone building a custom or luxury home, this means two things:
Start the planning process early—way earlier than you think.
Work with people who know how to navigate it (and who can help you keep your sanity in the process).
Regional Trends: Mornington Peninsula & Geelong in the Mix
A quick aside for those happy to look a little outside the metro area: the Mornington Peninsula now ranks as the second most expensive “regional” market in the country, with a median lot price of $637,500. Geelong’s not far behind, either. So if you’re chasing a tree or sea change but still want a luxury build, be prepared for similar pricing and approval headaches.
Why Does Any of This Matter For a Luxury Build?
If you’re planning a custom home, something with a bit of wow-factor, that fits your family and lifestyle perfectly, these market trends aren’t just background noise. They shape every decision you make, from location to layout to how you approach the design and build process.
Here’s what we’re seeing with clients (and why it’s more important than ever to work with people who “get it”):
Location Is Still King
The old real estate saying holds up. Even as block sizes shrink and approvals drag out, the best locations always command a premium, and deliver the best long-term value. If you’re set on a particular suburb, flexibility on other “wants” might be needed.
Custom Design Isn’t Just a Luxury, It’s a Necessity
With smaller blocks and higher prices, “off the shelf” solutions just don’t cut it. Custom design lets you use every inch, adding details and features that make your home feel truly yours. Think skylights, clever staircases, indoor-outdoor living, or a showpiece kitchen that makes the whole house work around it.
Plan For Approvals (And Then Add Extra Time)
There’s no sugar-coating it: getting plans through council in Victoria can be painful. Factor that into your timeline (and your patience). If you need to move by a certain date, work backwards and start early. Also, if possible, look for blocks that don’t have tricky overlays or recent development history, sometimes that can shave months off your timeline.
Budget Smart
The numbers don’t lie. Between land cost, approval fees, and actual build costs, you’ll want a contingency built in. Sometimes a smaller block in a premium area works out better (and more liveable) than a big block out on the fringe.
What Does a “Typical” Melbourne Land Buyer Look Like Now?
If you’re reading this and feeling a bit overwhelmed, honestly, you’re not alone. We’re seeing:
More buyers working with experienced agents and architects from day one, just to find and secure good land.
People willing to compromise on block size if it means getting into a better location.
More appetite for “forever homes” or serious knockdown-rebuilds, especially as land becomes so hard to find.
Greater focus on design features that add genuine, lasting value, energy efficiency, home offices, smart storage, and outdoor spaces that feel private and luxurious, even on a compact site.
Ready to take the next step toward your dream home in Melbourne’s competitive land market?
Contact Carmel Homes today to speak with our experienced team about building a custom home or knockdown-rebuild that’s perfectly tailored to your needs. Whether you’re ready to start designing or simply want trusted advice about your options, we’re here to guide you every step of the way.
