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Melbourne Housing Market Insights: April 2021


The Urban Developer’s Melbourne housing market insights for March reveals a record milestone for the city’s median home price.

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.


Despite the hit to foreign inbound migration that stimulates the Melbourne’s home-building industry, residential property prices are surging.

Melbourne’s median home price reaching a record with dwelling values breaching the previous peak set in April, 2020, by just 0.2 per cent.

Melbourne’s dwelling values have now increased by 13.8 per cent since bottoming out in mid-2019 and house values have risen by 4.4 per cent over the past three months.

The median price across houses is now $736,478 and units $593,121.

While every capital city recorded a rise in the proportion of properties selling above the purchase price, Melbourne in particular continues to outperform other cities as the most profitable capitals for sellers.

According to Corelogic, the proportion of profit-making sales rose to 94.3 per cent in Melbourne—up from 93 per cent in the previous quarter, despite the nation’s second-biggest city experiencing 112 days of coronavirus-related lockdown last year.

Melbourne median house and unit price values

TypeMonthQuarterAnnualMedian
All2.4%▲4.9%▲0.7%▲$736,620▲
Houses2.6%▲5.6%▲0.4%▲$859,097▲
Units1.7%▲3.0%▲0.9%▲$593,121▲

^Source: CoreLogic Hedonic Home Value Index - March


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Auction conversion rates have been steadily increasing due to a mismatch between low supply and high demand.

Across greater Melbourne, the average clearance rate has surged by 9 per cent from the previous quarter to hit a strong average result of 77.5 per cent.

Buyer activity has risen rapidly, with Corelogic estimating the number of settled dwellings sales over the past three months was tracking 38 per cent higher than a year ago.

Listing numbers are only 2 per cent higher than a year ago, implying demand is outpacing supply, contributing to the upwards pressure on prices.


Melbourne auction clearance rates

WeekClearance rate Total Auctions
Week ending 7 March 2021 80.9%477
Week ending 14 March 2021 80.3%1,094
Week ending 21 March 2021 78.9%1,319
Week ending 28 March 202183.8%1,899

^Source: Corelogic Auction Clearance Rates - March


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Vacancy rates for Melbourne remain elevated. The loss of international student tenants due to Covid-19 continues to hit the city hard and the ongoing high rate of dwelling completions is keeping rental markets in surplus.

Melbourne’s vacancy rate slipped to 4.4 per cent in March from 4.5 per cent in February, but remains highest vacancy rate in the country for both the house and unit markets.

The Melbourne CBD vacancy rate now stands at 8.3 per cent, down from the double digits last year and fell again for the month of March.

Rental prices have continued to fall in the face of record-level unit vacancy rates.


Melbourne residential rental vacancy rate

CityMarch 2021 vacancy rateMonthly % change
Melbourne4.5%▲0.1%▲

^Source: SQM Research - March


Rental stock on market

CityMarh 2021 vacancies Monthly net loss/gain
Melbourne27,300▼504▼

^Source: SQM Research - March


Melbourne rent prices

TypeRentMonthly % changeAnnual % change
Houses$512.70▼-0.4%▼-6.7%▲
Units$367.80▼-1.4%▲-12.8%▼

^Source: SQM Research - March


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Loan data shows investors have started coming back into a housing market they had largely vacated, this boom has been driven overwhelmingly by established owner occupiers and first home buyers.

Victoria has also recorded had the highest number of HomeBuilder appli­cations, with 26,858 lodged up to March 12.

Nationally there have been 93,403 HomeBuilder applications as at March 12, according to Treasury data, including 75,256 for new builds and 18,147 for “substantial” renovations.

Victoria building approvals

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

DwellingApprovedMonthly % change
Houses4213▲11.1%▲
Units5690▲21.7%▲

^Source: Australian Bureau of Statistics; Reference period February


Victoria home loan lending indicators

RegionFirst home buyer loan commitmentsFirst home buyer ratio - dwellingsFirst home buyer ratio - housing
Victoria4142▼43.1%▼36.8%▼

^Source: Australian Bureau of Statistics - February


Victoria interstate migration

RegionSeptember (quarter) 2020 arrivalsSeptember (quarter) 2020 departuresSeptember 2020 quarter net
201613,371▼17,120▼-3,749▼

^Source: Australian Bureau of Statistics - September quarter 2020


Melbourne’s housing market: policy updates

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

Victorian tax cut could deliver an even greater boost to in that state, given that more than half of mooted BTR projects are based in the southern state.

Read more: BTR Developers Boosted by New Tax Break


Melbourne housing market forecasts

Westpac has forecast Melbourne dwelling values will rise 10 per cent in 2021 and 2022, with the market moving into a sustained boom.

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 Housing Market: Experts Weigh In

Dr Nicola Powell


Nicola Powell
Senior Research Analyst
Domain

“I think we’re currently seeing a depletion of current stock in the market, where buyers are absorbing all the old listings as well as the new as there’s a real shortage of supply.

“That’s likely to translate into stronger price growth, so there’ll be a point at which affordability is going to bite, which will end up deterring some buyers, especially first-home buyers.

“We’re seeing strong demand, higher house finance and in Melbourne we are now experiencing the highest volume of auctions since 2018.”

Tim Lawless


Tim Lawless
Head of Research
Corelogic

“It was only a matter of time before the recent strong gains in housing values led Australia’s second largest city to move to record highs.

“Following a decline of 6.1 per cent through Covid-19, values have since grown by 6.7 per cent and are now sitting 0.2 per cent above their recent high record on April 6, 2020.”

Shane Oliver AMP


Shane Oliver
Chief Economist
AMP Capital

“The low interest rates mean a positive background but it was the [government] measures that made people buy.

“JobKeeper and the bank payment holiday kept people in the market—people who would have defaulted on their mortgage.

“The First Home Loan Deposit Scheme enabled first-time borrowers to get into the market a lot faster than they would have.

“Normally in a recession interest rates come down and people lose their jobs and are forced to sell their homes but that was all headed off by government incentives.”


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Article originally posted at: https://www.theurbandeveloper.com/articles/melbourne-housing-market-update

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