Melbourne Housing Market Insights: November 2021

The Urban Developer’s latest Melbourne housing market insights reveals new home listings soared by 82 per cent last month as vendors rushed back into the market after lockdowns ended.

This resource, updated periodically, 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 - October 2021

As Australia’s capital cities recover from Covid-19 lockdowns and restrictions, Melbourne’s housing market has boomed post-lockdown as listings and auction clearance rates surge.

Melbourne’s house prices have increased by 19.5 per cent in the past year, with the median price now $953,000, following a peak-to-trough fall in values of -5.6 per cent between April and September 2020.

Melbourne’s monthly rate of growth has now halved since the highs seen in March this year, when dwelling prices reached a monthly growth rate of 2.4 per cent—the fastest four-week increase the city has experienced in more than three decades.

October’s bump in dwelling prices was a modest lift from September’s result, when dwelling values grew at a rate of 0.8 per cent, while house prices growth has retreated from the previous month and unit values have perked up.

According to Corelogic, property values rose 1 per cent in October and are now up 16.4 per cent over the year, providing sellers with a gross yield of 2.7 per cent.

Dwellings values as a whole advanced by an additional $5000 over the month of October.

The average house in Melbourne is now selling for $973,000 and units for $622,000.

A typical Melbourne house is now about $170,000 more expensive than it was at the beginning of January, while units have experienced a gain of $44,000.

House prices jumped in the leafy north-eastern suburbs, up 27.5 per cent in Diamond Creek to a median $950,000 over the 12 months to September.

Big rises were also recorded in Warrandyte, up 22.5 per cent to $1,347,500, and Viewbank, up 20.9 per cent to $1,185,000.

Outer fringe suburbs where new housing developments are ramping up are losing the most growth momentum, with houses in the western suburbs of Cairnlea, Aintree, Wyndham Vale and Truganina have weakened the most in the state,

Melbourne’s housing market: policy updates and trends

Surging prices face ‘modest’ impact from tighter loan rules

New mortgage lending rules will do little to curb Australia’s runaway property market, regulators have admitted.

The RBA has kept interest rates at a record 0.1 per cent and has said it won’t lift them until inflation is “sustainably” within its 2 per cent to 3 per cent target range.

Victoria on cusp of approving Windfall Property Tax

The Victorian government looks set this week to pass its controversial Windfall Gains Tax—a 50 per cent levy on the extra value created from rezoning a piece of land.

The legislation, currently tabled in parliament, requires the “windfall gain” to be paid either when the land is sold or 30 years after the rezoning, whichever happens first.

Construction costs surge at fastest rate in 20 years

Residential construction cost increases are on the way to outpacing property price rises as Australia records the biggest cost increase since the introduction of the GST.

Construction costs increased 3.8 per cent in the September quarter and 7.1 per cent for the year, according to the Cordell Construction Cost Index, with the biggest increase in Queensland.

What the experts are saying about Melbourne's housing market

Nicola Powell

Nicola Powell
Senior Research Analyst

“Melbourne is the auction capital of Australia. The increased level of listings is in line with what we would expect —that reaction to coming out of lockdown, the reaction to having the theatre of on-site auctions again.

“So I think what we’re going to see over the next couple of weekends is a real test of seller pricing, as well as the depths of buyer activity and whether there are enough buyers out there to really absorb this level of auctions going to market.”

Louis Christopher

Louis Christopher
Managing Director
SQM Research

“APRA will most likely announce new additional measures as early as late next month or early 2022, as history tells us that they don’t just take one action, they usually go through multiple interventions.

“if the Australian housing market does not slow down by mid-2022, APRA will keep intervening until it does. We cannot afford another year of 20 per cent plus gains across the national housing market.”

Shane Oliver New

Shane Oliver
Chief Economist
AMP Capital

“I think house prices will start to fall by the end of next year if we get rate hikes on top of further increases in fixed mortgage rates.

“We’re looking for two rate rises next year which will take the official rate to 0.5 per cent by the end of the year.

“In the grand scheme of things that’s relatively modest, but then we probably get more hikes as we go through 2023 and then ultimately combining that with higher fixed rates, then that will put downward pressure on prices.”

Eliza Owen

Eliza Owen
Head of Research

“The slowdown in growth rates is likely being triggered by affordability constraints, and the higher levels of new listings being added to the market in recent weeks.

“The volatility at the high end of the market, demonstrated by the rapid decline in growth rates, suggests this segment can also expect a larger downturn in property values.”

Melbourne housing market forecasts

ANZ said it expects Melbourne’s house prices to lift by a further 7 per cent over the course of next year.

CBA forecasts Melbourne’s property prices to rise by 8 per cent in 2022, before dropping by -10 per cent in 2023.

NAB is currently forecasting house price growth of around 5 per cent for Australia’s capitals in 2022, with apartment price growth likely to be a bit more subdued in Melbourne.

Westpac is expecting Melbourne dwelling values to rise 8per cent in 2022, before dipping by -6 per cent in 2023..

Melbourne auction clearance rates

WeekClearance rate Total Auctions
Week ending 10 October 2021 81.9%1357
Week ending 17 October 2021 79.4%1478
Week ending 24 October 2021 80.1%1474
Week ending 31 October 2021 77.4%1739

^Source: Corelogic - October 2021

Melbourne’s monthly auction clearance rate for October was a healthy 75.3 per cent, its strongest month for 2021, although the preliminary clearance rate last weekend was a touch lower at 77.4 per cent.

In many parts of the city the demand for real estate is strong and homes are selling with hot competition and buoyant prices, but as more homes are listed for sale, signs of a less frenetic pace of growth are starting to emerge in some pockets.

Melbourne’s housing market, tipped to grow off the back of pent-up demand after the last extensive lockdown, has now softened as listings flood the market, with the number of new home listings up 32.7 per cent in October compared to the month before.

The proportion of vendors slashing asking prices in the middle of a sales campaign doubled to 7.5 per cent in Melbourne over October.

Discounted listings had fallen from 11.1 per cent in October, as the city endured its first difficult lockdown, to just 3.5 per cent in September of this year.

Melbourne residential rental vacancy rate

CityVacancy rateMonthly % changeVacanciesNet change

^Source: SQM Research - October 2021

Unsurprisingly, Melbourne’s rental market has suffered the effects of Covid-19 lockdowns more than any other capital, coming off record-high rents in March last year.

Melbourne’s vacancy rates are now at their lowest point since July 2020, falling from 3.5 per cent to 3.1 per cent in October.

However, the improving economic and health outlook has prompted a rush of tenants to lease vacant rental properties as east coast states emerge from lockdown with high vaccination rates and more certainty.

Melbourne’s inner-city, apartment-heavy market continues to lag behind the rest of the city.

Melbourne’s median inner-city unit rents remain down by $115 per week since March last year,

The Melbourne CBD is still at an elevated 5.8 per cent vacancy, although down from 14.4 per cent a year ago.

The geographical region of Stonnington East had the highest vacancy rate at 6.2 per cent.

Melbourne rent prices

TypeRentMonthly % changeAnnual % change

^Source: SQM Research - October 2021

Melbourne rent prices increased a negligible 1.8 per cent over the past 12 months as the city emerges from protracted lockdowns.

The city remains a tenants market for the near future given vacancy rates remain considerably higher when compared to other capitals across the nation.

Lockdown-ravaged Melbourne is currently the second most affordable city to rent with an average rent of $450 per week behind Adelaide where the average rent is rent at $440 per week.

Rents will likely continue to rise and vacancy rates will fall further once international borders reopen but the rental market will not see the same boom as the sales market due to the glut of apartments.

Melbourne has chalked up one of the strongest apartment completion rates on record despite high-vacancy rates putting downward pressure on rents according to an industry report.

Almost 15,000 apartments were completed in the 2021 financial year, boosting supply well above demand to increase vacancy rates and drive down rents in Melbourne.

The median asking for unit rents declined 10 per cent in the 12 months to June 2021, while the vacancy rate was about 3.5 per cent.

Victoria building approvals

DwellingApprovedMonthly % change

^Source: Australian Bureau of Statistics - September 2021

Victoria’s record-setting building boom appears to finally be slowing, with the number of new houses approved for construction falling to its lowest level since August last year.

But it’s only a tapering, with demand still high enough to drive Melbourne’s median land price to an almost $335,000 record across the three months to September, and with enough work in the pipeline already to have builders booked to the second half of 2022.

The boom has been big enough to cause shortages of numerous building supplies, most notably wooden frames.

Despite this, Australian Bureau of Statistics figures showing 3470 new houses approved for construction across Victoria in September were well above pre-pandemic levels—though down from a record 4724 given the green light in April.

The latest figure is the lowest since August last year, when there were 3381 approvals—narrowly toping the 3351 figure set in July.

Victoria home loan lending indicators

TypeLending ($bn)Monthly % change
New loan commitments for owner occupier housing 6.39-12.0%▼
New loan commitments for investor housing 2.461.1%▲
New loan commitments to first home buyers 3.92-16.7%▼

^Source: Australian Bureau of Statistics - September 2021

Victoria’s average new owner-occupier loan size is currently the second largest in the country, behind NSW, at $606,000.

New mortgage lending to Victorian owner-occupiers recorded an outsized 16.7 per cent drop in September as lockdowns stymied activity in the state, and NAB economists have predicted a lift in housing activity into the end of the year as health restrictions ease.

According to the Australian Bureau of Statistics, weekly pay rose by 2.2 per cent nationally over the year to September and 0.6 per cent over the September quarter.

While wages have increased 81.7 per cent in the past 20 years, Australian home values have grown 193.1 per cent.

According to Roy Morgan, an estimated 584,000 mortgage holders, 15.8 per cent, are currently ‘at risk’ of ‘mortgage stress’ as of the September quarter.

Mortgage stress dropped to record lows during this period with fewer than 600,000 mortgage holders considered ‘at risk’ for the first time.

The level of mortgage stress is down on a year ago during Victoria’s long second lockdown when an estimated 668,000 mortgage holders, 18.3 per cent were considered ‘at risk’.

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.

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