Melbourne housing market conditions have been consistently softer than the capital city average, with housing values rising 0.8% in September to be 15.0% higher over the year, which is the lowest annual growth rate across the capital cities, but still the highest growth rate across Melbourne since 2010.
The unit market has been a drag on the headline growth rates, with unit values up 8.3% over the year compared with an 18% lift in house values.
Across the sub-regions of Melbourne. the Mornington Peninsula stands out with the highest annual rate of gain at 31%, followed by Melbourne’s Outer East where values are up 17.6%.
The softest sub-regions have been in Melbourne West and the Inner City where housing values are up 9.4% and 10.4% respectively.
As the spring listing season gathers pace, new listings being added to the Melbourne market are now tracking 18.3% above the five-year average and total listings are now 2.9% above average.
Higher stock levels could take some further heat out of the market over the coming months.
Here’s what’s currently happening in Melbourne
The Melbourne property market has been one of the strongest and most consistent performers over the last four decades and despite having a lull last year thanks to Covid19, it is now forecast to perform strongly in 2021 with double digithouse price growth likely in the next 12 months.
Both buyers and sellers are now back in the Melbourne property market as consumer confidence has picked up strongly, resulting in a higher number of property transactions, auction clearance rates are strong and prices are rising, but Melbourne’s inner city apartment market still looks in bad shape.
FOMO (fear of missing out) is now prevalent in those interested in Melbourne real estate, but there is still plenty of growth left as Melbourne property values have only just reached their pre-pandemic levels and are about to create new peaks, meaning they will only now reach the previous 2017 peak levels.
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Houses in regional Victoria with easy access to the capital city continue to be in strong demand.
On the other hand, high-rise apartments in the many Melbourne CBD towers or close to universities are likely to underperform and keep decreasing in value.
Melbourne is the auction capital of Australia. After bearing the brunt of the impact of COVID-19 last year, auction clearance rates in Melbourne have been at boom time levels.
The Real Estate Institute of Victoria (REIV) reported that Melbourne recorded an overall auction clearance rate of 84.8 per cent from more than 3,000 auctions held in February 2021, beating out the decade-high clearance rate of 84.0 per cent recorded in 2010.
Over February 2021, across Victoria 17 suburbs (with a minimum of 10 auctions), saw a 100 per cent clearance rate including: Hawthorn East, Fitzroy North, Ferntree Gully, Rowville, Brunswick East, Sandringham, Seaford, Collingwood, Ashburton, Blackburn South, Fawkner, Wantirna, Boronia, Fairfield, Hillside, Seddon and St Kilda West.
Meanwhile, Reservoir recorded the highest number of auction sales: 44 out of 53 total listings.
This was followed by Coburg, which cleared 37 out of 38, and Bentleigh, which sold 35 out of 40 properties put to auction.
Other suburbs on the top-selling list are Brunswick (34), Preston (34), Glen Waverley (33), Mount Waverley (31), Craigieburn (30), Richmond (30) and Carnegie (29).
Melbourne’s top performers 2021
The Melbourne economy has undoubtedly been the most impacted by COVID-19 in Australia, both because of the second major outbreak in case numbers through the September quarter, and because international migration has been a key component of population growth across the state, and thus an important contributor to aggregate demand, and housing demand.
The charts below compare various economic indicators across Australia and Victoria.
State final demand fell -3.4% over the 2020 calendar year compared with a -1.1% decline in National GDP.
Employment levels are higher in Victoria compared with pre-COVID levels, more so than the whole of Australia, but the state suffered a larger contraction in employment through late 2020.
Housing values across the combined capital cities are now 7.4% above February 2020, and while Melbourne property values are at record highs, they have not made the same gains as other capital cities, sitting just 2.4% higher due to the more significant reduction in housing values through the extended lockdown period.
The chart below summarises sub-market performance of dwellings across SA4 regions of Victoria.
Each region has seen an increase in values in the 3 months to April, and all but two markets are higher in value over the year. Regional Victoria continued to show a significantly faster pace of growth in housing values relative to Melbourne over the past twelve months.
The lingering impact of COVID-19 is felt geographically in the inner city region of Melbourne, where closed international borders has a significant negative impact on demand for rental property in particular.
CoreLogic estimates that Inner Melbourne housing markets account for 45.9% of investment unit stock across the greater Melbourne metro