REIV: where home values are up $1m+ post pandemic, and why prices could soon rise more

House prices in hundreds of Victorian suburbs and towns are $100,000 and even $1m better off since the pandemic. Find out how yours is doing, and why prices could soon rise again.

Prices in Flinders have soared since this property sold for $3.09m in 2020.

Victoria’s housing market is on the cusp of ending its latest downturn with almost every suburb and town still hundreds of thousands of dollars better off than before the pandemic.

New Real Estate Institute of Victoria figures have revealed that at the end of March 553 suburbs around the state were still in the black compared to the same time in 2020 when Australia entered a state of emergency in response to the virus, while just 13 were down.

And a leading economist who twice predicted home price wipeouts now believes the market could grow as much as 3 per cent this year.

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The REIV figures show Melbourne’s typical house has lost about $100,000 (9.1 per cent) in the past year as 10 interest rate hikes and increasing cost of living bites buyers’ budgets.

But longer term most of the state is still ahead, with Flinders on the Mornington Peninsula’s $3.7m median house price still more than $2m ahead and double the $1.565m recorded in March 2020.

AMP Capital chief economist Shane Oliver predicted an up to 20 per cent home value hit in 2020, but said government interventions like JobKeeper as well as a reduction in interest rates had helped avoid his expectations of home value falls.

Last year Dr Oliver renewed his 20 per cent projection for the following 18 months.

He is still currently tipping an 8 per cent fall across 2023, but said with a range of positives in play it was now a “coin toss” and he wouldn’t be surprised if there was instead 2-3 per cent growth by the end of the year.

“It’s quite possible that we will see more upside from here, but the risk is that the economy has a harder landing as a result of the interest rate hikes,” Mr Oliver said.

“The Victorian market seems to have weathered the consecutive storms of the pandemic and interest rate rises. But that does leave the market with a longer term risk with debt levels quite high and mortgage rates being a lot higher than what they were.”

This Flinders home sold for $1.825m in the midst of the pandemic, but could be worth much more now.

However, with interest rates now double what they were a year ago, he said any growth in home values would be minimal as the typical homebuyer could borrow 20 per cent less.

REIV president Andrew Meehan said with new home construction slowing and population rising, prices were being held up as demand outpaced homes being listed for sale.

“In the last 12 months about 40 per cent of suburbs have increased, and I would expect that number to continue to grow,” Mr Meehan said.

He added that most buyers had adjusted to interest rate rises and 2023 would be a “normal year” for home values.

“That own your own home desire we have in Australia goes towards that and people will keep finding ways to do that,” he said.

“Be that through shared equity models or the bank of mum and dad.”

This Middle Park home sold for $3.04m just before the pandemic. But median prices in the area have since fallen.

However values have soured in 13 suburbs since the pandemic hit, with Middle Park’s $2.485m median currently $415,000 below its 2020 figure.

Cranbourne’s typical house is $242,500 worse off, and in Parkville the market has fallen $170,000.

Mr Meehan said he saw little reason why Middle Park had lost value when nearby Elwood was rising, but noted that over the long term almost every suburb would have gained value.

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