Land banking by developers is expected to push up already-high lot prices in Melbourne’s outer housing estates as soaring demand from first-time buyers and construction costs bite.

As home prices soar in Melbourne’s established suburbs, many mum-and-dad buyers are looking to city fringe house-and-land packages for more affordable options.

Housing estates across the city now stretch from Tarneit in the west to Kalkallo in the north and Pakenham in the east.

But even there, the window of opportunity is narrowing.

“This year, we expect to see more developers begin to drip-feed vacant land releases to give them time to catch up on construction,” said Luke Kelly, director of RPM Real Estate Group.

As a nationwide material and labour shortage bites, developers are winding back land they normally release for housing projects in a bid to manage a backlog of sales that are taking longer than usual to subdivide and hand over to buyers on individual titles.

This year, we expect to see more developers begin to drip-feed vacant land releases to give them time to catch up on construction.

Luke Kelly, director of RPM Real Estate Group

“This supply deceleration, in combination with a high demand environment, will no doubt continue to apply upward pressure to vacant lot prices and buyers will need to continue to shift their expectations both in terms of price and delivery timelines,” Mr Kelly said.

Just two years ago land sales across the city’s greenfield estates were at a three-year low as buyers and developers grappled with the effects of the pandemic. Since then, however, sales came back strongly, a shift now likely to be pegged back again.