Property buyers in Melbourne are seeing more value in lots and house-and-land packages than existing houses, according to a study by RPM Real Estate Group.

During the final quarter of 2019, Melbourne and Geelong's land markets recorded a 17% increase in overall lot sales activity to 3,185. The two markets clocked their eighth straight month of sales growth in November. Furthermore, sales activity in December managed to outperform the monthly average despite it being a slower month.

"Buyers are seeing value in the land market given they can negotiate a well-priced larger lot, with developers keen to move returned titled stock and unsold lots," said Luke Kelly, RPM head of communities.

The median lot price in Greater Melbourne remained on the muted side, falling by 2.1% to $308,900 in the quarter and by 5% from the same period a year ago. The moderation in median lot prices might be due to the volume of discounted titled supply returning to the market and the overhang stock that has started to ease.

"The rising values in the established market and moderating prices in the land market have reduced the land-price-to-house-price ratio, meaning buyers are seeing more value in a block of land or a house-and-land package rather than an existing house," Kelly said.

The quarter also witnessed a significant upturn in the development site market, attributed to the pent-up demand from developers who waited for market conditions to stabilise.

The inner- and middle-ring apartment and townhouse markets also showed positive approval figures. However, there remains a mismatch between supply and demand.

"New project activity going through the pipeline is vital given once supply is absorbed there will need to be readily available stock to meet demand. Otherwise, a shortage will occur, putting pressure on vacancy rates, rents and prices overall," Kelly said.