Melbourne areas where homes cost less than land revealed in major blow to fixing the housing crisis

Houses that cost less than land? Yes. Find out where.

Tiny Melbourne blocks of land are being sold for the same price as a house in the same area as the city grapples with a bizarre affordability issue threatening home building goals.

Despite the median home price falling over the past two years to make Melbourne the nation’s fifth most affordable capital, new figures show the city’s typical patch of dirt costs $1070 a square metre — the second highest figure in the country, behind Sydney.

Housing Industry Association economist Maurice Tapang said the price of land was now the biggest constraint on new housing construction in Australia’s capital cities, and that Melbourne might not have an increase in new housing construction even after there is an interest-rate cut given established homes could be bought for less.

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PropTrack economist Paul Ryan said high demand for land during the pandemic had pushed up the price of blocks of land across the country, but their figures show Melbourne is the only major capital to record consistent established home value falls for the past two years.

“And that has resulted in a shift in preferences to established housing, and it’s becoming increasingly hard to make new housing equations stack up,” Mr Ryan said.

“There’s lots of choice for established homes and the prices have gotten relatively more attractive compared to new homes, and that’s something we’ve heard a lot of from developers.”

22 Morris St, Melton South - for herald sun real estate

22 Morris St, Melton South, is currently for sale with a $339,000-$369,000 asking price.

It’s dire news for the Allan government’s annual goal of 80,000 homes to be built each year for the next decade across Victoria, with Australian Bureau of Statistics figures showing just 52,780 homes were approved across the state in 2024 — including 33,262 houses.

Separate figures collated by CoreLogic for the Housing Industry Association’s 2025 Residential Land Report covering every council area with at least 10 empty blocks sold in the three months to September last year, show buyers are getting better value for money out of an existing home.

In one of Melbourne’s most affordable municipalities, Melton, a median priced $325,000 block spans just 315sq m. The area’s typical price per square metre of land is now $1000.

That doesn’t include building costs, which averaged $537,000 for a new house approved in December, according to the ABS.

Inside, the 22 Morris St, Melton South, needs a bit of work — but is far cheaper than building a new home.

Barry Plant Melton’s Ned Nikolic is currently selling “Melton’s cheapest house”, a three-bedroom home on a 599sq m block at 22 Morris St that is seeking a sale for $339,000-$369,000.

While it needs a little work, he said it was an example of why he was seeing homebuyers who had started speaking with a builder in the area pivot to looking at an established home — with discounts of $40,000 and more available compared to the cost of building new for a home that was just three years old.

A fire-damaged house in the same suburb sold in September last year for $335,000 with a 640sq m block — about $523 a square metre.

7 Charles Court, Melton South - for herald sun real estate

7 Charles Court, Melton South, sold last year for $335,000.

Those looking to buy in the municipality of Merri-bek face an extraordinary $3707 price tag for every metre of dirt, with a typical block in the area to Melbourne’s north spanning 259sq m and coming in with a $1.12m price tag.

Earlier this year a four-bedroom house on a 276sq m block in Brunswick was sold for just $1.065m.

But beyond Melbourne’s urban growth boundary, the median price of land is just $500 a square metre.

It drops as low as $234 in the Wellington Shire in the state’s south east.

Mr Tapang warned with the Covid pandemic providing a precedent for work from home, it was likely that for those willing to build a new home — areas outside of Melbourne would soon become more popular.

27 Eveline St, Brunswick - for herald sun real estate

27 Eveline St, Brunswick, sold for $1.065m last year. Typical prices for a block of land in the municipality are $1.12m.

“There is a risk there that Melbourne and Sydney just become unaffordable and people need to seek land further out,” he said.

“So I think people will be flocking there, as it doesn’t make much of a different from a commute perspective, but from a pricing perspective the cost of land is close to half.

“And if we start to see population growth in these outer areas, we will see that structural shift.”

He noted that with a $433sq m a square metre price in Bendigo, it was possible to get a 600sq m block there for half the price you’d pay in Melbourne.

He’s also tipped Geelong’s land prices to move closer to Melbourne’s.