Satterley is already partnering with builders on townhouses at its Point Cook estate in the west and developing low-rise apartment buildings of up to three stories, after the price of a median lot surged $100,000 in the past year, hitting $350,000 in March, according project marketers Red23.

Speculators abound

Amid the boom in land prices and shrinking affordability, Mr Satterley said he was also concerned at the growing number of speculators in the Melbourne market and the emergence of a secondary land market, where buyers are attempting to sell-on lot contracts for profit on websites like Gumtree, before settlement.

"About two months ago, I was in an Uber taxi in Melbourne on my way to a meeting in Brighton and got talking to the driver.

"He told me that he and all his friends were borrowing as much money as they could from the bank so they could to put down $20,000 deposits on blocks of land.

"I've told the banks, Melbourne is a market to watch because there's a secondary land market with lots being secured on low deposits.

"After any big boom there is always a downward adjustment in prices and Melbourne will see a bit of that I reckon, so it's going to be interesting to see if developers can settle these lots," he said.

Satterley, which will settle over 1800 lots in Melbourne this financial year giving it about a 10 per cent share of the market, is maintaining its focus on selling only to Australian residents and is clamping down on speculation, by requiring all buyers to first settle before reselling.


"We don't sell vacant house-and-land lots in Asia or China," added Mr Satterley.

'We're going great'

Despite his current concerns, Mr Satterley believes strongly in the Melbourne market – "we're going great and doing better than anyone else" – because of its strong population growth, better affordability than Sydney and its status as the world's most liveable city.

"We've seen Melbourne annual lot sales go from over 22,000 down to 18,000 because of affordability. But even at 14,000 to 15,000 sales a year it would still be a good market," said Mr Satterley.

His decision, a decade ago, to head east into Melbourne and south-east Queensland has proved a masterstroke as Satterley's home base market of Perth has continued to struggle since the end of the mining boom. About 30 per cent of Perth lot sales still fall over, he said.

Satterley has continued to acquire sites – two recently in Melbourne's north (on Donnybrook Road) and south east as well as acquisitions in Perth and south-east Queensland – but is not under pressure to compete with mainly Chinese developers who have paid hundreds of millions for major sites recently, including a record $400 million paid by Country Garden in the west.

"Our land bank is strong enough to last for the next four to five years. So we are not in hurry to buy and will do so sensibly," Mr Satterley said.

Acquisitions will continue to be funded through its syndication model where it partners with institutions and wealthy families (the minimum syndicate investment is $1 million) with Satterley a co-investor. To date Satterley project syndicates have returned between 17 per cent and 22 per cent while keeping gearing low at 45 per cent to 50 per cent.

"We control property assets of $2.75 billion, but our total debt is under $200 million. The largest debt across our 28 projects is $35 million with only one other debt more than $20 million," Mr Satterley said.

"All the banks are keen to fund new acquisitions for developers with good long track records. We've been nearly 50 years with ANZ and 30 years with NAB and both of them are happy to fund our deals."