Melbourne Housing Market Insights: September 2021

The Urban Developer’s latest Melbourne housing market insights, looking at the month for August, reveals a dramatic withdrawal in listings as the city remains firmly shuttered in a sixth lockdown.

This resource, updated monthly, will collate and examine the economic levers pushing and pulling Melbourne’s housing market.

Combining market research, rolling indices and expert market opinion, this evolving hub will act as a pulse check for those wanting to take a closer look at the movements across the market.

Melbourne median property prices % change


^Source: Corelogic - August 2021

Despite the city being in lockdown since mid July, property prices have continued to grow in Melbourne, albeit at a slower pace.

The city remains the nation’s fourth fastest growing market, behind Canberra, Sydney and Hobart.

The rate of price growth has continued to moderate after reaching a peak in March this year, after values rose 4 per cent across the first three months of the year.

August’s bump in dwelling prices was a modest slowdown from July, when dwelling values climbed at a rate of 1.3 per cent, 1.7 per cent for houses and 0.4 per cent for units.

The latest Corelogic figures, for August, reveal property values rose 1.2 per cent, and are now up 13.1 per cent over the year.

The current median value for a dwelling is $770,000 after further advancing an additional $8000 over the month of August.

Melbourne house prices grew by 1.4 per cent, to be up 5 per cent for the recent quarter and 15.6 per cent for the year to date.

The average house in Melbourne is now selling for $954,000 while the median for units and apartments is now for $616,000.

A typical Melbourne house is now $130,000 more expensive than it was at the end of January this year, while units have experienced a gain of $115,000.

Property experts expect prices to surge post-lockdown due to tempered demand for homes and the supply of properties for sale tightening.

The country’s major banks maintain they are still seeing strong interest in new mortgage lending, as borrowers flock to lock in cheap fixed-rate mortgages in anticipation of an increase in official interest rates.

Melbourne’s housing market: policy updates

Auction Inspection Restrictions Set to Ease

Covid-19 related restrictions under which in-person inspections had been banned would be eased once 70 per cent of Victorians had received at least one dose of a coronavirus vaccine.

The government said in a recent media statement that it was estimated Victoria would reach that 70 per cent first-dose milestone by September 23.

Under current restrictions, in-person inspections and public auctions have been banned and moved entirely online, seeing the usually busy spring market take a hit for the second year in a row.

Victoria’s Eviction Bans Replaced by Rental Laws

A ban on tenant evictions in Melbourne will not be reintroduced, with renters instead being offered a $1500 relief grant to help them through the latest coronavirus-related lockdown.

The state government said protections already in place under the new rental laws were enough to keep tenants safe from unreasonable evictions.

Victoria’s Budget: Stamp Duty, Jobs and Housing

Forming its $5.3-billion “Big Housing Build” initiative, build-to-rent land tax changes were included in the budget, which would make more projects in the sector viable.

What the experts are saying about Melbourne's housing market

Dr Nicola Powell

Nicola Powell
Senior Research Analyst

“The fact is, lockdowns or not, some people still need to buy; they could be in between houses, they could have missed out earlier in the year, and now they’re ploughing ahead and making a strong offer.

“Melbourne’s median auction price increased only because there was not enough stock on the market to satisfy demand.

“Most people in Melbourne will hold off selling until in-person inspections were allowed again on September 19, when Victoria is projected to have 70 per cent of its eligible population vaccinated with at least one dose.

“That, in itself, is great news for the market [and] it gives so much clarity for buyers and sellers and means sellers are postponing rather than withdrawing.

“Before that date, they were withdrawing because there was no end in sight.”

michelle Ciesielski

Michelle Ciesielski
Head of Residential Research
Knight Frank

“With Melbourne achieving double-digit home price growth despite several months in lockdown during last year’s Covid-19 second wave, the city should rebound strongly as current restrictions eased.

“We have seen a bounce after these restrictions have eased each time and for a city impacted by several lockdowns, the results have been quite strong.

“People are certainly reassessing the way they want to live, and those in Melbourne have experienced that more than anywhere.

“Melbourne’s market this spring will be quite important— particularly given the city largely missed its primary selling season last year.”

Shane Oliver AMP

Shane Oliver
Chief Economist
AMP Capital

“[Bank payment holidays and income support] has protected from what would normally happen in a downturn—people defaulting on their loans, businesses going bust and prices going down.

“When lockdown ended the market stabilised fairly quickly and took off again [and] suspect that’s what you’ll see this time around again, and we’ll see it reflected in mortgage applications.

“They slowed sharply nationally through lockdowns and then were held down to some degree during the September quarter by the Victorian lockdown, and then recently, they’ve gone to record highs, but the indications are they’re still holding up pretty well this time.

“We haven’t seen the falloff we saw a year ago, which is consistent with property markets generally holding up better.”

Eliza Owen, Head of Research, Corelogic

Eliza Owen
Head of Research

“Social distancing restrictions don’t have as much of an impact on prices as they do on transaction activity.

“It’s more tied to affordability constraints and that is evidenced in the narrowing gap of houses and units.

“There are definitely signs there that there are demands for housing, and buyers are potentially looking for more affordable pockets of the market and that includes units.”

Melbourne housing market forecasts

Westpac is expecting Melbourne dwelling values to rise 10 per cent in 2021 and 2022, with the market moving into a sustained boom.

CBA forecasts property prices would rise by 8 per cent in 2021 and 6 per cent in 2022, with house prices to rise 16 per cent in that time and unit prices by 9 per cent.

NAB is currently forecasting house price growth of around 10 per cent for Australia’s capitals in 2021, with apartment price growth likely to be a bit more subdued, particularly in Melbourne.

ANZ recently said it expects Melbourne’s house prices to lift by of 16 per cent over the course of the year.

Melbourne auction clearance rates

WeekClearance rate Total Auctions
Week ending 9 August 202173.5%710
Week ending 16 August 2021 64.0%954
Week ending 23 August 2021 48.6%1067
Week ending 30 August 2021 34.7%1185

^Source: Corelogic - August 2021

Melbourne withdrawals impacted the combined auction clearance rates of Australia’s capital cities across August.

Property listings in Melbourne have fallen by 17.3 per cent over August as people wait for the market to open back up.

Clearance rates have also plummeted, falling to 36.7 per cent last weekend, while 390 properties were withdrawn from auction.

“Clearly, [in August] we saw a remarkably different outcome in auction results across Australia’s two largest auction markets,” Lawless said.

“This can be explained by the fact that properties can still be physically inspected in Sydney (although a private inspection is limited to one person at a time), but not in Melbourne.

“The divergence in the auction clearance rate tells the story about how important it is for prospective buyers to be able to physically inspect a property in order to make such a high commitment decision as buying a home.”

Well-heeled neighbourhoods are high on shopping lists according to recent data from Domain—measuring active buyers on who are more likely to purchase, such as shortlisting a home or sending an enquiry, over the week to September 5.

Buyer demand up 77.6 per cent in the Stonnington east, compared to this time last year, and up 34.3 per cent for Stonnington west.

Demand in Bayside has jumped 73.8 per cent and Boroondara is up 42.5 per cent, while there have also been strong rises in the tree-change hotspot of the Macedon Ranges and more affordable options such as Keilor and Tullamarine - Broadmeadows.

Melbourne residential rental vacancy rate

CityVacancy rateMonthly % changeVacanciesNet change

^Source: SQM Research - August 2021

Melbourne and Sydney continue to have by far the highest rental vacancy rates of all Australia’s capital cities, with the national rate sitting at 1.6 per cent.

Currently 3.5 per cent of rental properties in Melbourne are sitting empty tightening by 0.1 per cent over August.

Melbourne is now one of the two cheapest capital cities in Australia for tenants looking to rent a house, on par with Adelaide.

Domain senior research analyst Nicola Powell said after four months of the vacancy rate loosening in Melbourne, the result marked the second consecutive month where it had tightened.

“Because this is now the sixth lockdown they’ve had, there’s an element of greater vulnerability in the market with casual workers and people on low incomes who may have lost jobs or hours in the lockdown period suffering,” Powell said.

Melbourne rent prices

TypeRentMonthly % changeAnnual % change
Houses$519.700.0%▲ -0.2%▲

^Source: SQM Research - August 2021

“There’s also no rental moratorium anymore, so we’re seeing tenants really struggling and having to move back in with families or friends.”

Houses with four bedrooms or more within 5km from the Melbourne CBD are fetching the biggest rental returns so far this year, outpacing any other configuration as demand for extra space skyrocketed during lockdown.

The property type returned a median of $1000 in the inner ring, compared to $795 in the city’s middle suburbs and just $450 in the outer ring, according to PRD Real Estate.

Houses in the middle ring were the most resilient, recording the highest median rent growth in the past year, at 5.3 per cent, while one-bedroom units, which were largely occupied by international students and travellers before the pandemic, dropped 9.6 per cent annually to fetch a median rent of $330.

Victoria building approvals

DwellingApprovedMonthly % change
Houses4001▼-7.3 ▼
Units6054 ▲-11.0▲

^Source: Australian Bureau of Statistics; Reference period July

New dwelling approvals have declined for a fourth consecutive month as the surge in detached housing, propelled by the federal government’s HomeBuilder stimulus, continues to drop out of the system.

Australian Bureau of Statistics figures for July show a seasonally adjusted total of 17,601 dwelling approvals, a dip of 8.6 per cent on June’s result and marked the lowest monthly total since January.

Building approvals were weighed down in part by a 24 per cent decline in detached house approvals from their peak of 15,443 in April to 11,671 in July.

The monthly decline in the total number of dwellings was broad-based, with private sector houses falling 5.8 per cent and approvals in private sector dwellings, excluding houses, falling 12.3 per cent.

The return of lockdowns across parts of New South Wales and Victoria meant approvals for private sector houses fell 4.2 per cent and 7.3 per cent respectively.

Victoria home loan lending indicators

TypeLending ($bn)Monthly % change
New loan commitments for owner occupier housing 6.720.4%▲
New loan commitments for investor housing 2.46-3.1%▼
New loan commitments to first home buyers 3.92-9.6%▼

^Source: Australian Bureau of Statistics - July 2021

Investment mortgage loan growth outpaced lending to owner occupiers and first home buyers for a third month in July.

Investors are continuing to take advantage of record low interest rates and their extra wealth as rising prices put housing out of the reach of younger buyers.

Investor spending on established housing dwarfs their investment in new dwellings by nine times and spending on established homes is growing faster.

Over the 12 months to July, new investor loans to buy existing dwellings totalled $66 billion, up 48 per cent on the total a year earlier, while mortgage lending for new housing totalled just $7.3 billion, an increase of almost 22 per cent.

Total new home loan commitments were little changed from June, ticking up just 0.2 per cent to a seasonally adjusted $32.1 billion.

New owner-occupier loans slipped to $22.8 billion from $22.9 billion, while first home buyer loans fell to $5.8 billion from $6.3 billion in June.

The latest Housing Industry Association measure of housing affordability also shows a sharp deterioration across the country over the past year.

In Sydney, median prices are 9.2 times average household earnings and in Melbourne prices are 7.6 times earnings.

Victoria interstate migration

RegionArrivalsDepartures (quarter) 2021 departuresNet change 2021 quarter net

^Source: Australian Bureau of Statistics - March 2021

Victoria and New South Wales continue to feel the pandemic-fuelled drain losing thousands of residents in the first three months of the year as they moved to other parts of Australia, with Queensland emerging as the preferred destination.

The latest figures from the Australian Bureau of Statistics reveal Victoria suffered a net migration loss of almost 5000 people between January and March this year as departures outstripped arrivals.

There were 18,907 people who moved to Victoria during the three month period but 23,771 residents who left.

NSW experienced the next biggest fall in interstate migration, with 30,684 departures compared to 26,221 arrivals.

There were over 100,000 people who moved interstate during the first three months of the year, with Queensland gaining the most people; 7000, while Victoria lost the most closely followed by New South Wales.

Since the start of the pandemic, a net 22,651 people have left Melbourne for other parts of Victoria.

In total, Melbourne has lost a net 34,366 residents, including 3682 who have made the move to Brisbane.

In the March quarter, a net 8300 people left Greater Melbourne compared to 8500 in the final three months of 2020.

It was the second-largest quarterly drop in internal migration for Melbourne this century.

Show Comments
advertise with us
The Urban Developer is Australia’s largest, most engaged and fastest growing community of property developers and urban development professionals. Connect your business with business and reach out to our partnerships team today.
Article originally posted at: https://www.theurbandeveloper.com/articles/melbourne-housing-market-update