LAND prices in Melbourne's growth-area suburbs may be starting to level out after two straight years of falls, new research suggests.
Since December 2010, Melbourne's land prices have fallen by about 16 per cent.
But the latest figures from Oliver Hume Real Estate Group suggest prices have started to level out as buyer confidence grows, researcher Andrew Perkins said.
"It is conceivable that after eight consecutive quarters of falling prices, we may be close to the bottom of the current cycle," Mr Perkins said.
"I think prices have pulled back to what you might call a normalised market."
From their peak, the local government areas of Whittlesea (down 18.6 per cent), Melton (down 16.9 per cent) and Casey (down 14.5 per cent) experienced the largest falls.
Overall, prices have declined at a rate of $49 a day since 2010.
"It's pretty much wiped out the value of the first home owner grants and boosts" handed out by state and federal governments, said Philip Soos, a researcher with tax reform lobby Land Values Research Group.
"Many investors just can't sell at the moment. They're becoming reluctant landlords," he said.
The downturn has put pressure on the industry.
One consequence was a jump in incentives being offered by developers.
Some are tempting buyers with price discounts, cash rebates, fencing, landscaping, interior design or, in some cases, even free cars - and the dollar amount offered blew out to an average $15,000 per lot in the December quarter, Oliver Hume figures show. By contrast, for much of 2010 no incentives were waved in front of buyers.
The number of estates around Melbourne actively selling land to mums and dads has risen to 142, the highest on record. That figure is forecast to rise further, to 160.
Developers will be squeezed by a corresponding drop in land sales to around 65 lots per project, Oliver Hume said.
"I'm not saying there might not be another decline in the next quarter but I think we've pushed through the hardest times," Mr Perkins said.
First home buyer incentives and lower mortgage rates delivered far fewer first home buyer finance commitments than expected in 2012, RP Data analyst Cameron Kusher said.
"Considering that the numbers of commitments were up by 4.9 per cent compared with 2011 volumes, and standard variable mortgage rates were 85 basis points lower in December 2012 than they were in December 2011, this is a fairly disappointing result," Mr Kusher said.