After a tumultuous year, the Victorian real estate market has closed out 2020 with some good news. CoreLogic’s Research Director Tim Lawless stated that the latest data indicates that Melbourne is “bouncing back quite quickly after the downwards pressure caused by the lockdown.”
Overall the national picture is a lot rosier than many pundits expected, with CoreLogic reporting that the national home value index rose +1.0 per cent in December; the third consecutive month values grew. The firming of the market in the final quarter is in stark contrast with much of the year, which was characterised by COVID induced volatility.
The Real Estate Institute of Victoria (REIV) noted that the pandemic impacted transaction volumes in Victoria over 2020, but overall property prices have held steady. Some may find this surprising, but if you look at a trifecta of factors the relative stability of the sector is understandable, namely:
The fiscal support for the broader economy from the Government
Record low interest rates
The relative success Australia has had containing the outbreak
Now let’s take a closer look at how the Melbourne and Victorian property markets performed over December 2020.
Melbourne market update
The Melbourne market advanced +1.0 per cent over the month, which brings it into positive territory of +1.5 per cent for the quarter, but leaves the market down by -1.3 per cent over the past year.
The -1.3 per cent decline in growth for the year was largely driven by the extended second lockdown that Melbourne endured. Dwelling values in the city are however still -4.1 per cent lower than their March 2020 peak.
Overall CoreLogic reports that the median dwelling value for Melbourne in December is $682,197, with houses showing the strongest growth trend, advancing +1.2 per cent over the month for a median house price of $799,980.
Units were also up again (+0.6 per cent) over the month, but Melbourne is the only capital city to not have recorded a higher rate of capital gain for houses relative to units in 2020.
REIV data show standout performers at the suburb level include Glen Waverley, which advanced an impressive +6.4 per cent in the September quarter for a median house price of $1,300,000.
Melbourne suburbs with the highest median house prices include Toorak, ($4,912,500), Brighton ($3,087,500) and Canterbury ($2,749,000).
According to CoreLogic the upper quartile is where home values are recovering the fastest - up +0.98 per cent in December, after suffering the largest falls due to COVID.
Suburbs where units performed well over the same timeframe include Bentleigh East (+17.7 per cent), Toorak (+16.9 per cent), and Carnegie (+15.2 per cent).
REIV data show standout performers at the suburb level include Glen Waverley, which advanced an impressive +6.4 per cent in the September quarter
The REIV also reports auction clearance rates are looking decidedly more positive across the state, with 84 per cent of houses selling in the week ending December 2020. Units recorded a 79 per cent clearance rate over the same timeframe.
Regional Victoria market update
Overall regional Victoria performed soundly, advancing +1.8 per cent over December for a median dwelling value of $416,288. It has also outperformed Melbourne metro by advancing +5.6 per cent over the year - while Melbourne registered a -1.3 per cent overall dip over 2020.
The regional Victoria market outperformed Melbourne metro, advancing +5.6 per cent over the year
The trend for regional living is partially driven by COVID and the added flexibility that remote working has brought. Realestate.com.au chief economist Nerida Conisbee believes we will see more of this in 2021, with people looking for a lifestyle change in regional Victoria and coastal areas.
A recent report released by ME Bank identified some of the regional towns finding favour with first time buyers, with Woodend, Tatura, Kilmore, Wangaratta, Beechworth, Castlemaine, Mansfield and Port Fairy all proving popular.
Victorian rental market update
Like many urban markets COVID-19 has had a significant impact on rental markets in Australia, with Greater Melbourne unit rents falling -7.0 per cent in the year to November 2020. This has largely been driven by a reduction in international students and investor activity. Overall the trend has been for house rents to grow, while unit rents have dropped.
Overall the trend has been for house rents to grow, while unit rents have dropped
Overall gross rental yields for dwellings are 3.1 per cent in Melbourne, and 4.3 per cent for regional Victoria. REIV data shows that the median rent in metro Melbourne is currently $475/week, with a rental yield of 2.8 per cent; while regional median rent is $350 with a rental yield of +4.2 per cent.
As our November market update pointed out, a recovery for the rental sector in Melbourne will be reliant on international borders re-opening.
The outlook for 2021
The million dollar question is what we can expect from the new year, after a generally torrid 2020?
Let’s see what the experts think.
Eliza Owen, CoreLogic’s Head of Research Australia, believes that, ‘...despite Melbourne dwelling values joining a broad-based recovery trend in November, and values rising +0.7 per cent in the month, the disproportionate volume of stock to sales volumes may slow the rate of recovery across the city in 2021.’
Her colleague, Tim Lawless cautions that fresh COVID outbreaks, and the associated restrictions, ‘...would set back the economic recovery and have a negative, although temporary impact on housing markets.’
Realestate.com.au chief economist Nerida Conisbee is positive on the prospects for home sellers in 2021, ‘...assuming the Victorian and NSW Governments control the current COVID-19 outbreaks,’ and believes the market ‘will continue to see high levels of activity in the new year.’ For this to happen she is assuming conditions in 2021 include low interest rates, government incentives for buyers and that Australia’s economy continues to reopen.