Coronavirus real estate: Melbourne home values dip in April
Melbourne was the worst-performing capital city market last month, with values falling as COVID-19 caused an “enormous shock to demand”. But the outlook for prices isn’t too dire.
The coronavirus crisis has officially made a dent in Melbourne’s housing market, with the city’s dwelling values dipping 0.3 per cent last month amid an “enormous shock to demand”.
This made Melbourne the nation’s worst-performing capital in April, with Hobart the only other major city to record a fall in house and unit values (0.1 per cent), according to property data firm CoreLogic.
It was the first negative monthly result recorded by Victoria’s capital this year, following a subdued March during which values crept up just 0.4 per cent.
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But Melbourne housing prices are still 12.4 per cent higher than they were a year ago, at a $695,761 median — and CoreLogic head of research Eliza Owen isn’t forecasting “extreme” declines during the pandemic.
“There has been a pretty enormous shock to housing demand across Melbourne and Victoria, with the biggest impact in transaction volumes,” she said.
“We estimate the amount of property transacting in Melbourne was down by 40 per cent over the month.
“Values will continue to slip. But at the end of the day, values can’t fall that much if properties aren’t selling.”
CoreLogic found new listings were 35 per cent lower across Australia than they were a year ago, with sellers as reluctant to participate in the market as buyers.
AMP Capital chief economist Shane Oliver said social distancing and the associated economic uncertainty were “driving a collapse in sales volumes, with both buyers and sellers putting property transactions on the backburner”.
He tipped 10-15 per cent price falls for Melbourne throughout the pandemic, should local lockdown measures be eased this month, but said that could worsen to 20 per cent if the shutdown stretched beyond six months due to a second wave of coronavirus cases.
Marshall White Bayside director Matthew Pillios said he found sales activity slowed to a crawl following the Prime Minister’s banning of physical auctions and open for inspections in late March. But his office was already starting to ink more deals, especially off market, as buyers and sellers adjusted to the new normal.
These included a sale worth about $8.5 million in Brighton’s Golden Mile.
Ms Owen said Melbourne’s monthly decline was driven by “weakness in the unit sector and in the top end of the market”, as well as halted international migration cutting off a major source of housing demand.
The Melbourne market’s upper quartile dragged down its overall figures, shedding 0.8 per cent last month, while the lower and middle quartiles notched subtle rises.
The city’s inner east took the biggest hit, with values falling 0.9. On the flip side, they improved 0.9 per cent in regional Victoria.
CoreLogic research director Tim Lawless said while most of the capitals had recorded “slightly positive” results in April, growth rates had “clearly weakened since mid to late March, when social distancing policies were implemented and consumer sentiment started to plummet”.
While Sydney values rose 0.4 per cent in April to a $889,992 median, its dependence on overseas migration and foreign students as a source of housing demand “stretched housing affordability” and already low rental yields put it in the same risk category as Melbourne.
Ms Owen said Melbourne rental rates had shed 0.5 per cent in recent weeks, with more falls to come.
She said the inner ring was in particular strife, with rental listings soaring 30 per cent in recent weeks at the same time the tenant pool was slashed by halted overseas migration and the sudden unemployment of many young people.
Supply was also being boosted by Airbnbs being converted into long-term rentals and new units being completed.
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Originally published as Coronavirus real estate: Melbourne home values dip in April