Melbourne Housing Market Insights: May 2023


The Urban Developer’s latest Melbourne housing market insights reveal that the median home value climbed to $755,871 in May 2023, which was a 0.9 per cent bump from the previous month.

This rise put the Victorian capital up 1.6 per cent for the rolling quarter. For the year to May, home prices were down 7.4 per cent amid rising inflation and home loan interest rates.

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 - May 2023

Melbourne’s residential property market has shown a significant upswing, reflecting a broader trend of robust growth across Australia’s capital cities, according to CoreLogic’s latest Home Value Index (HVI) report.

CoreLogic’s HVI recorded a third straight monthly rise in May, with a sharp acceleration in growth to 1.2 per cent, up from 0.6 per cent and 0.5 per cent in March and April respectively.

While Sydney took the lead with a 1.8 per cent lift in values over the month, Melbourne also contributed significantly to the growth trend​​.

However, despite these gains, Melbourne’s housing market values remained 8.2 per cent below the peak recorded in February of the previous year, CoreLogic said.

This contrasts with Perth, the only city where home values have returned to record highs.

Melbourne’s situation is less dramatic than Hobart, which has recorded a 12.6 per cent drop since its peak in May of the previous year, and Sydney and Brisbane, which are 9.6 per cent and 9.4 per cent below their peaks respectively​​.

The resurgence in Melbourne’s property market, and across the country, can be attributed to a combination of factors, most notably the low levels of available housing supply clashing with surging housing demand.

CoreLogic research director Tim Lawless said the number of capital city homes advertised for sale in May was lower than in April by roughly 1800.

Compared to the same period last year, inventory levels are 15.3 per cent lower and 24.4 per cent below the previous five-year average for this time of year​​.

This shortage of available housing stock is causing buyers to become more competitive, with a palpable sense of Fear of Missing Out (FOMO) creeping into the market, he said.

The heightened competition is pushing up auction clearance rates, which have consistently held at 70 per cent or above over the past three weeks.

For private treaty sales, homes are selling faster and with less vendor discounting​​.

Meanwhile, Bryce Yardney wrote that most property commentators had called the bottom of the Melbourne market, “with the data indicating that the Melbourne property market had reset and was moving into the next phase of the property market”.

“But what is clear is that a clear flight to quality properties continues across Melbourne with A-grade homes and ‘investment grade’ properties still in short supply for the prevailing strong demand, but B-grade properties are taking longer to sell and informed buyers are avoiding C-grade properties.”

Melbourne’s housing market: policy updates and trends

Melbourne's planning system ‘hinders development’

Victoria’s planning system, characterised by restrictions on building heights and slow approval processes, is exacerbating Melbourne’s housing crisis, it is claimed.

With an estimated need for 1.3 million new homes in the next 30 years, current plans fall short, and increased migration further intensifies the demand.

Reforms including incentivising affordable housing, expanding the Urban Growth Boundary, and implementing a streamlined approval code for medium density housing are proposed to address the issue, but require government action at bstate and local levels.

Victorian premier weighs rent caps

Victorian premier Daniel Andrews has not dismissed the possibility of rent caps as part of a major housing statement, in response to calls from social welfare groups and industry speculation, it was reported.

This comes as about 860,000 property owners face a Covid-19 debt levy, averaging $1300 annually for the next 10 years, announced in the Victorian Budget.

While ruling out a rent freeze, Victorian Treasurer Tim Pallas has not ruled out the potential for rent caps, as the government works on a housing affordability package that is expected to include planning reforms and assistance for renters, the AFR reported.

Indian buyers surpass Chinese, experts say

The housing market in Melbourne’s western suburbs was witnessing a surge in Indian, Malaysian, and Singaporean property buyers, surpassing the dominance of Chinese investors, News Corp reported.

Real estate agents and mortgage brokers report an increasing clientele from these regions seeking suburban homes, with Truganina having the highest concentration of Indian residents in the west.

The rise in foreign buyers, coupled with inadequate infrastructure, raises concerns about overpopulation and affordability for first-home buyers in Melbourne.

What the experts are saying about Melbourne’s housing market

Tim Lawless
Head of Research

“Inventory levels [nationally] are 15.3 per cent lower than they were at the same time last year and 24.4 per cent below the previous five-year average for this time of year.

“With such a short supply of available housing stock, buyers are becoming more competitive and there’s an element of FOMO creeping into the market.

“Amid increased competition, auction clearance rates have trended higher, holding at 70 per cent or above over the past three weeks, while for private treaty sales, homes are selling faster and with less vendor discounting.”

Nicola Powell
Chief of Research and Economics

“Our expectations are high ... people push themselves and try to buy a home that is larger than they currently need.

“Going from two bedrooms to three is an 11 per cent increase in median price, and from three to four it’s 18 per cent.

“The more bedrooms you add there’s a larger price increase.”

Shane Oliver
Chief Economist
AMP Capital

“The RBA is threatening to raise rates further particularly as wages growth risks accelerating, fixed rate mortgages are now resetting to much higher interest rates and on the RBA’s estimates, more than 15 per cent of variable rate borrowers will have negative cash flow by year end, all of which, combined with higher unemployment, could lead to an increase in listings by distressed sellers.

“The rebound in home prices could itself spur the RBA to raise interest rates more than it otherwise would have done because rising home prices could drive a positive wealth effect offsetting its efforts to try and slow consumer spending down.

“…So, while our base case is that home prices have bottomed with stronger increases likely next year, the risk of another leg down as the full lagged impact of interest rate hikes on the property market and on unemployment materialises is high.”

Louis Christopher

Managing Director
SQM Research

“First home buyers are active in the market. They are being squeezed by the rental market. Investors are also active, they’re capitalising on the increase in rents.

“All buyers are keeping one eye on the Reserve Bank of Australia.

“If the RBA were to lift rates again next week that could pause the market, it could create the false dawn in the market that we’ve been a little cautious about for the year.”

Melbourne auction clearance rates

WeekClearance rateAuctions/SoldTotal sales
Ending 6 May 202367%598 / 414 $328,408,340
Ending 13 May 202368%591 / 403$317,510,593
Ending 20 May 202370%665 / 468    $349,037,100
Ending 27 May 202371%695 / 496     $389,216,664

^Source: Domain - May 2023

In April, Melbourne’s clearance rate improved for the third straight month to reach the highest since October 2021, Domain reported. The annual growth rate registered a positive figure for the first time since August 2022.

April marked a significant turnaround for Australia’s housing market, with clearance rates across the combined capitals reaching a 14-month high, Domain reported.

This is the first time in 15 months that clearance rates have increased annually, up by 5.3 percentage points.

Meanwhile, clearance rates across the combined regionals reached a 13-month high, marking the first annual increase in 16 months, up by 3.1 percentage points​.

The most auction-centric cities, Sydney and Melbourne, witnessed clearance rates higher than the same period last year, bucking the trend of a generally sluggish market. However, Canberra remained an outlier with no monthly clearance rate increase observed.

Rebounding auction clearance rates provide evidence that pricing has either stabilised or passed through a trough in some capital cities, hinting at a potential market recovery.

This resurgence has been largely underpinned by the unseasonably weak flow of new listings since Spring 2022, which has led to a decline in auction listings and increased competition among buyers, Domain said.

The drop in auction listings has also proven beneficial for sellers, as heightened competition has led to more favourable auction offers. The limited choice for buyers has seemingly spurred them into making more competitive bids, leading to more positive outcomes for sellers.

Despite a decline in auction volumes across the combined capitals and regionals over the month and over the year, Adelaide managed a monthly increase in auction activity.

Lower auction volumes were largely expected in April due to the numerous public holidays, and all capitals remained lower compared to a year ago.

For the combined capitals, the proportion of properties sold before auction day rose for the third month in a row, reaching its highest point since November 2021.

The proportion of auctions withdrawn also declined this month, reaching its lowest point since May 2021. Despite weak auction volumes, sellers seem determined to proceed with their auction campaigns to secure deals for their properties.

A similar trend was observed for the combined regionals, where the proportion of properties sold before auction day grew in April, reaching its highest point since June 2022.

The proportion of withdrawn auctions also fell over the month, marking its lowest point since October 2021.

As for house and unit sales, across the combined capitals, house clearance rates were higher than units, with most capital cities following this trend.

However, Brisbane saw unit clearance rates perform better, a shift that could be attributed to ongoing issues with affordability, lower borrowing capacity, and perceived value.

In terms of auction prices, house results were mixed, with Brisbane and Adelaide the only cities to record monthly increases in the median auction price for houses. Unit results were weaker, with Sydney and Melbourne declining over the month and year.

Melbourne residential rental vacancy rate

CityVacancy rateMonthly % changeVacanciesNet change

^Source: SQM Research - April 2023. Monthly change calculated from vacancy numbers

Melbourne’s vacancy rate remains steady at 0.9 per cent in May, Domain data showed.

This was half of the same time last year, showing the strength of the rental market and the mismatch between supply and demand.

It continued to experience the greatest annual fall in rental listings of the capitals, down 46.7 per cent annually and at an all-time low for May.

Vacancy rates were mixed across the capitals, Domain reported.

The steady increase in supply across most capital cities this year had  improved vacancy rates but the ongoing rental crisis continued as they remained low.

The majority of cities were continuing to rise or stabilise, so if this trend continued, it could indicate a turning point for the broader rental market, Domain said.

Melbourne rent prices

TypeRentMonthly % changeAnnual % change

^Source: SQM Research - to the week ending June 4 2023

Melbourne gross rental yields came in at 3.5 per cent for May 2023 against a national figure of 3.9 per cent and a combined capitals result of 3.7 per cent, CoreLogic research found.

With housing values once again rising, gross rental yields looked to
have stabilised below the pre-Covid decade average of 4.2 per cent (nationally), CoreLogic said.   

Melbourne unit rents rose 5.2 per cent over the rolling quarter to May.

CoreLogic’s National Rental Index rose 0.8 per cent  increase for May, a rate of growth that outperformed the pre-pandemic decade’s average monthly rise of 0.2 percentage points.

The recent figures also reflected a subtle deceleration compared to monthly increases of 1 per cent in March and 0.9 per cent in April.

The tempering in rental growth was worse in regional markets, where rental prices edged up by a mere 0.3 per cent over the past month. Rental prices in major cities recordeded a robust 1 per cent uptick.

By property type, city house rents had a more pronounced easing in monthly growth at 0.9 per cent, compared to unit rents, which climbed 1.4 per cent.

Despite the slight dip in rental growth, it was important to recognise that rents were still generally on the rise, CoreLogic’s Lawless said.

However, exceptions do exist in some capital cities such as Darwin and Canberra, where rents had notched a quarterly decrease of 0.2 per cent and 0.7 per cent respectively, he said.

Some of the bigger city unit markets were witnessing rising rent. In the past quarter, Sydney had a 5.7 per cent increase in unit rents. Perth matched Melbourne with a 5.2 per cent surge, and Brisbane came in softer at 3.8 per cent.

Capital city unit rents were about 9.5 per cent lower than house rents, a narrower margin than the 14.8 per cent gap a year ago.

The returning influx of international students and immigrants had spurred demand for higher-density rental accommodations, CoreLogic said.

As a result, areas with a higher population density—typically preferred by new migrants—had seen a jump in demand.

Moreover, the resumption of office work and the reemergence of bustling CBDs might be driving up rental demand in inner-city areas, Lawless said. 

Domain research earlier found Melbourne house and unit rents increased for the sixth straight quarter, matching the 2007-08 growth record.

House rents recorded the fastest quarterly rise in six years and the highest annual increase since 2008.

Despite record March quarter highs, Melbourne remained the most affordable city for house rentals, as other capitals experienced larger growth.

Accelerating rents pushed house gross rental yields to a three-year peak.

Unit rents reached record highs with the city's steepest quarterly and annual growth.

The unit rental growth outpaced house rents for five consecutive quarters, narrowing the price gap to nearly a three-year low.

Rising rents led to all-time high gross rental unit yields.

CoreLogic’s Quarterly Rental Review said that the return of overseas migrants and international students, who typically choose to rent in Melbourne and Sydney, has narrowed the gap between Melbourne and the second most affordable rental capital, Adelaide, from $15 a week in December to $5 ar week in March.

CoreLogic also reported the rental yield for Melbourne rose 15 basis points to 3.4 per cent.

Brighton in the inner-south is Melbourne’s most expensive suburb to rent at $1294 on average for a house.

The most affordable is Melton South at $337 a week.

Victoria building approvals

DwellingApprovedMonthly % change
All dwellings3209-18.6%

^Source: Australian Bureau of Statistics - April 2023

Victoria’s construction industry is navigating rough waters, as building approvals in the state have plunged, according to the latest data from the Australian Bureau of Statistics (ABS).

The figures for April 2023—the latest—show a sharp decrease of 18.6 per cent in total home approvals in Victoria, marking one of the steepest declines across Australia​​.

The ABS report also revealed that the approvals for private sector houses in Victoria fell by 9.3 per cent during the same period. This is in line with the trend observed in other states such as Queensland and NSW, which recorded a drop of 6 per cent and 1.7 per cent respectively​.

The decline in Victoria is part of a broader national downturn in building approvals. The ABS reported an 8.1 per cent decrease in total homes approved in April 2023, on a seasonally adjusted basis. Private sector houses fell by 3.8 per cent, while private sector homes excluding houses fell 16.5 per cent​.

The value of total building approvals rose by 4.7 per cent, bouncing back from a 5.7 per cent fall in March. This increase, however, did not prevent a 2.5 per cent decline in the value of total residential building approvals, which includes a 2.7 per cent decrease in new residential building and a 1.2 per cent fall in alterations and additions​​.

While the downturn is felt across the country, the impact varies between states.

Queensland experienced the sharpest fall in total dwelling approvals, with a drop of 22.8 per cent.

Western Australia also had a decrease, though less severe at 5.8 per cent​. In contrast, South Australia, NSW, and Tasmania recorded rises in total dwelling approvals, with increases of 19.8 per cent, 12.5 per cent, and 3.5 per cent respectively​.


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