The Melbourne suburbs where property values are back to pre-pandemic levels

Property values have fallen back to pre-pandemic levels in a string of Melbourne’s inner suburbs, new data shows.

In some suburbs, values are well below where they were when the country was first put into lockdown because rising interest rates have reduced buyers’ budgets.

Across the city, unit values have taken the biggest hit, as buyers sought bigger homes to work remotely and many international students and workers were kept out of the country by border closures in 2020 and 2021.

In Kew East, unit values plummeted by 18.5 per cent between March 2020 and October this year, to a median value of $888,661, CoreLogic data shows. They also tumbled by 18.1 per cent in Hawthorn East, to $629,297.

In Ascot Vale, unit values fell by 17.1 per cent, and they were down by 16.4 per cent in Hawthorn.

For houses, the biggest fall in value was in Windsor, down by 14.1 per cent since March 2020, to a median $1,542,251.

In St Kilda, house values dropped 12.4 per cent over the same time, while they were down by 12.2 per cent in South Melbourne and 11.3 per cent in Malvern East, stripping the gains made during the COVID-19 boom.

Melbourne’s property values jumped 17.6 per cent during the boom in 2020 and 2021.Credit: Luis Enrique Ascui

Other suburbs’ house values held steadier and remained just below where they had been in 2020 including Parkdale, where values were down by just 0.1 per cent and even Heidelberg Heights which fell just 0.8 per cent. Values in many Melbourne suburbs are still higher than when the pandemic hit.

CoreLogic executive research director Tim Lawless said property values had fallen significantly in some suburbs after the pandemic boom lifted Melbourne’s property values by 17.6 per cent.

Though this was a big jump in values, it was lower than other capital cities, Lawless said.

Melbourne’s six lockdowns, in which in-person auctions and property inspections were banned for long stretches, meant price growth was more subdued.

“So the fact we’re seeing more suburbs in Melbourne at these pre-COVID levels is not due to them falling much faster than other cities,” he said. “They’ve just had a smaller gap in values to fall back to.”

This year, Melbourne’s values have fallen by 6.5 per cent, on CoreLogic figures, and the market has shifted from a boom to a downturn, after the Reserve Bank of Australia lifted interest rates seven times since May.

Interest rate rises have already squeezed the amount that buyers qualify to borrow from their bank and spend on property.

Jellis Craig Boroondara selling agent Mike Beardsley said properties at the premium end of his market were holding up, while those priced between $500,000 and $1.5 million were feeling the pinch of interest rate rises.

“It’s a very price-sensitive market at that range - young professionals who are getting into the market, or stepping up from a unit are feeling it,” Beardsley said.

Buyers’ advocate Cate Bakos said cheaper properties, usually snapped up by first home buyers, were struggling to find buyers now.

But those who had money behind them, or were unaffected by rising interest rates, were in a much better position to buy now than they had been in 2020.

Those with the right-sized deposit are in the box seat to buy.Credit: Luis Ascui

“Those with the right-sized deposit are really in the box seat at the moment,” Bakos said.

Though full-time property investors were holding back, some buyers were taking advantage of lower prices, she said.

They were looking to buy rent-ready properties that they could buy and develop later, once the issues relating to building supplies and a lack of available trades, caused by a COVID-19 building boom, subsided.

Abercromby Real Estate’s Simon Curtain said the low supply of houses for sale in Stonnington, Boroondara and other inner east areas was keeping prices steadier than those of units.

“The supply side of things is still a feature,” Curtain said. “But if you’ve got something good in terms of layout and condition, and they are priced right, it will sell well.”

Curtain said the interest on units had been subdued, but they were still transacting.

Some buyers were looking for a city bolthole as a second home, returning from the Mornington Peninsula where many had moved to escape lockdowns.

Some buyers and sellers were looking to get deals done, especially before Christmas, as others made plans to sell in the New Year, he said.

“People are saying they just want to get sorted before the holidays,” Curtain said.