Melbourne Housing Market Insights: July 2021

The Urban Developer’s Melbourne housing market insights for June reveals house price growth despite a fifth city-wide 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 house and unit price values


^Source: CoreLogic Hedonic Home Value Index - June

Melbourne home values are 5.3 per cent higher than their previous pre-Covid peak reached in March 2020, or $37,646, new figures from CoreLogic show.

In Melbourne, house values rose 1.8 per cent or almost $22,000 despite the start of June being dominated by a lockdown.

The city’s median value is now at a record $930,00 after increasing 11.4 per cent over the first half of the year.

A further 7.5 per cent rise would take the median house value in Melbourne beyond $1 million by Christmas.

It’s not the first time house prices have rushed towards a million-dollar median in Melbourne.

The city’s house prices were initially predicted to reach a $1-million median by mid-2018, after a series of house price rises in 2017.

House prices in the inner east rose by a massive 7.1 per cent over the March quarter to a median of $1.6 million.

Melbourne’s Mornington Peninsula also saw huge jumps in house prices, up by 6.7 per cent during the March quarter and a massive 16.6 per cent during the year, to a median $845,000.

Despite Melbourne’s overall unit price growth, the data showed apartments in the inner city fell by 2.5 per cent during the quarter with the lack of international students due to the coronavirus pandemic weighing heavily on the market.

Despite this units are up across the year to a median of $610,000—a rise of 4.7 per cent over that period.

Melbourne’s housing market: policy updates

The Federal government rolled out its latest budget in May, a single-year plan centring on aged care, childcare, infrastructure, investment tax breaks and more help for home buyers as it tapers off the record spending from last year’s budget.

Read more: Federal Budget 2021: Property Hits and Misses

The Home Builder scheme will continue until the end of March in a bid to prevent a major decline in construction activity.

Read more: HomeBuilder Gains Eleventh Hour Extension

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.

Read more: Victoria’s Budget: Stamp Duty, Jobs and Housing

Melbourne Housing Market: Experts Weigh In

Dr Nicola Powell

Nicola Powell
Senior Research Analyst

“When you compare Melbourne to Sydney, it is further behind in the property cycle and, for that reason, I think there is more room for further price growth in Melbourne.

“We’ll see Melbourne defy the odds for a typical winter and already our figures are showing that June was very strong in terms of the number of winter auctions.

“We are likely to see prices continue to rise and push further away from their previous peak, but gains might slow from the start of the year when the Melbourne market really opened back up with a lot of pent-up demand after a year of extensive lockdowns.”

Tim Lawless

Tim Lawless
Head of Research

“We have already probably moved through the peak rate of growth, which was back in March for most capitals, and the second half of this year won’t be as strong.

“When you consider household incomes aren’t rising all that much, maybe 1.5 per cent annually, we’ve seen that rate of growth in house prices in the space of a month, so you have to expect that with housing prices rising so much more quickly than household incomes there are going to be fewer people able to participate.

“As demand starts to reduce, we will start to see listing numbers start to normalise, and it will give buyers a chance to negotiate a bit more as FOMO (the fear of missing out) starts to dissipate.”

Shane Oliver AMP

Shane Oliver
Chief Economist
AMP Capital

“We are expecting further price gains of 20 per cent over 2021 but this could be threatened by coronavirus outbreaks and snap lockdowns in various cities.

“But providing the lockdowns are relatively short, then the experience from the eight previous snap lockdowns around Australia since November, including recently in Victoria, suggests it won’t be enough to derail the housing market upswing.”

Eliza Owen, Head of Research, Corelogic

Eliza Owen
Head of Research

“As with house prices, rent prices are seeing a deceleration in growth at the national level and across each of the capital cities, which may reflect affordability constraints, but there could also be higher levels of rental supply as investor activity in the market increases.

“Very high rental growth is unsustainable while income growth remains subdued.

“The result will likely be more subdued growth rates in the coming quarters, especially as investor participation trends higher, delivering more rental supply.”

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.

In February, CBA forecast 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 6 June 202167.3%1098
Week ending 13 June 2021 73.0%365
Week ending 21 June 2021 71.5%786
Week ending 27 June 2021 75.9%1414

^Source: Corelogic Auction Clearance Rates - June

The impact of lockdowns and Covid-19 weighed heavily on Melbourne’s auction market over the month, nonetheless the city still recorded its highest June result since 2015.

Melbourne’s auction market was holding steady ground throughout 2021, as clearance rates consolidated between 70 per cent and 74 per cent.

This was partly due to real estate agents rushed auctions forward to beat the June 30 deadline for stamp duty discounts.

Stamp duty discounts were introduced by the Victorian government last year to help stimulate the property market during the coronavirus pandemic lockdowns, which saw public auctions banned for months on end.

The savings included a 25 per cent discount for existing properties priced under $1 million and a 50 per cent discount for new home builds under the same price threshold.

Anyone who signs a contract of sale for an existing home from July 1 will have to pay the full stamp duty costs.

For an established home worth $1 million, that’s an extra $13,750 in tax.

Melbourne residential rental vacancy rate

CityJune 2021 vacancy rateMonthly % change

Rental stock on market

CityJune 2021 vacancies Monthly net loss/gain

Melbourne rent prices

TypeRentMonthly % changeAnnual % change

^Source: SQM Research - June

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

Comparatively, rents in Sydney rose just 3.2 per cent in Junewhile lockdown-hit Melbourne was the only city to go backwards, down 1.4 per cent.

It’s the first time Melbourne has been one of the lowest-cost cities, with the median house rent holding steady at $518 a week over the June quarter.

Melbourne’s pandemic-hit apartment market lifted slightly to be at the the same amount tenants were paying in 2015, but remain 12 per cent lower than a year ago.

Domain senior research analyst Nicola Powell said it remained the steepest downwards adjustment in unit asking rents that Melbourne has ever recorded.

“However, the number of available rentals have been dropping quite quickly recently, which shows that more people are moving to Melbourne to take advantage of the cheaper rents.”

Westpac senior economist Matthew Hassan said Melbourne’s difficulties had been exacerbated by the lack of international students and completion of new apartment projects in the city.

Ultra-low interest rates were helping landlords through the pandemic, as was the lack of available tenants, though this may not last.

“It’s really hard to read the future of this one—every hit to the vaccine rollout has delayed the return of students and those moving back from overseas,” Hassan said.

“This is really a 2022 story because we’re not entirely sure, from when the borders open, how resurgent the migration flows will be.”

Victoria building approvals

^Australian Bureau of Statistics, (Suspension of trend series between May 2020 and Jul 2020 due to Covid-19)

DwellingApprovedMonthly % change

^Source: Australian Bureau of Statistics; Reference period May

The Australian Bureau of Statistics data indicated dwelling approvals dropped 7.1 per cent in May, following a 5.7 per cent decline in April.

Despite this, approvals were up 55 per cent on last year with 144,827 new houses approved, the most in a one year period since records began in 1983.

These growing workloads combined with building material supply and price uncertainty having a negative impact on developers and builders.

Across the country, the number of dwelling approvals fell in Queensland by -13.1 per cent, in South Australia -11.9 per cent, New South Wales by -10.9 per cent and Western Australia by -8.7 per cent.

Victoria and Tasmania were the only places to have an increase by 3.2 and 2.0 per cent respectively.

Victoria home loan lending indicators

RegionFirst home buyer loan commitmentsFirst home buyer ratio - dwellingsFirst home buyer ratio - housing

^Source: Australian Bureau of Statistics - May

The push for home ownership nationally intensified over May, with the latest lending figures showing a surge in loan commitments for new housing.

Latest figures from the Australian Bureau of Statistics for the month of May show a 4.9 per cent jump in new housing loans, more than double the value of lending in the same month of last year and is at its highest level since June, 2015.

This equates to $32.6 billion of new debt committed, driven by a bump up in the number of new investor loans being signed.

ABS head of finance and wealth, Katherine Keenan, said May’s surge was driven by double digit growth in new investor loans

“The value of new loan commitments for investor housing rose 13.3 per cent to $9.1 billion in May 2021, which was the highest level since June 2015,” Keenan said.

“Investor loans equated to 28 per cent of the total value of housing loan commitments in May 2021, compared to 46 per cent in 2015.”

Investor loans growth was primarily in Victoria which rose by 17.4 per cent.

The Victorian governments currently has various exemptions and grants for qualifying first home buyers with various purchase price caps as well as other limits and criteria.

The state government has also recently increased the stamp duty on properties that sell for more than $2 million by 1 percentage point for the portion of the price paid over $2 million—from 5.5 per cent to 6.5 per cent.

Victoria interstate migration

RegionDecember (quarter) 2020 arrivalsDecember (quarter) 2020 departuresDecember 2020 quarter net

^Source: Australian Bureau of Statistics - December quarter 2020

Melbourne is home to around 4.82 million people which accounts for 19.05 per cent of the national population.

However, Victoria suffered its biggest migration drop since 1994 in the December quarter as 6500 people left the state across the three months.

According to the Australia Bureau of Statistics, the mishandling of the Covid-19 pandemic has led to the state’s biggest net migration loss since March 1994 when 8500 people left with over half moving to Queensland.

The metropolitan area also felt a record migration drop as the city saw a net loss of 8500 people from the Greater Melbourne area in December 2020 compared to the previous quarter.

Melbourne’s December 2020 net loss was the highest recorded since the ABS began recording its net migration in 2001.

In the previous quarter before December 7400 people left the city.

Federal treasury expects net interstate migration to Victoria will average 7825 per annum over the four years to 2024-25.

Sydney Housing Market Insights: July 2021

Sydney Housing Market Insights
Catch up on the highlights across Sydney’s property market...

Brisbane Housing Market Insights: June 2021

Brisbane Housing Market Insights
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