If 2021 is being billed as a year of positive change after a decidedly bumpy ‘20 then Australian home values have heeded the call and responded accordingly.
Melbourne has played no small part, with new listings and activity soaring as people emerged from lockdown.
CoreLogic reports that, ‘every capital city and broad rest-of-state region recorded a rise in housing values over the month’, with the national home value index up +0.9 per cent over January.
Property values are now at record highs, with housing values now +1.0 per cent higher than their pre-COVID levels, and the overall index is +0.7 per cent higher than its peak in September 2017.
Domain reports that, ‘Melbourne’s property prices have staged a massive comeback, not only surpassing pre-pandemic levels but skyrocketing to set new house and unit price records’.
The other highlight is the strong performance regional markets continue to post, advancing at more than double the pace of metro markets over the month, up +1.6 per cent vs +0.7 per cent. The ‘flight from the cities’ phenomenon is largely behind this shift, and only time will tell if those making the move will ditch city life permanently.
Now you have a sense of the big picture, let's take a closer look at what’s happened in the Melbourne and Victorian property markets over January 2021.
Melbourne market update
Overall the Melbourne market advanced +0.4 per cent over January to finish +2.1 per cent for the quarter, down -2.1 per cent for the YTD, at a median dwelling value of $692,162.
The Real Estate Institute of Victoria (REIV) reports that, ‘metropolitan houses in Melbourne surpassed a median value of $900,000, jumping by +9.5 per cent from the September quarter to land at $941,000’.
The median value of units across metro Melbourne is now $639,500, +2.5 per cent higher than the September quarter, with the REIV recording an estimated 29,500 transactions in the December quarter. This was the highest number since the March quarter when 27,500 were recorded.
If you are looking for standout performers at the suburb level, Domain’s latest House Price Report identified locations where lifestyle properties are in demand; these areas include the Mornington Peninsula, where house prices advanced nearly +25 per cent over the past year.
Other suburbs posting significant gains over this timeframe include Blairgowrie (+24.8 per cent), McCrae (+24.3 per cent), Brunswick East (+23.3 per cent) and Port Melbourne (+21.1 per cent). Suburbs where prices fell include inner-city Clayton (-11.1 per cent) and Armadale (-10 per cent).
There have also been double digit rises for units across some Melbourne postcodes, with standouts including Burwood (+27.6 per cent), East Melbourne (+21.5 per cent) and Williamstown (+19.4 per cent).
Regional Victoria market update
As for much of 2020 regional markets have shown their city cousins a clean pair of heels as people looked for more space, fresh air and ‘lifestyle’. This has led to significant rises in home values, in some cases at more than three times the pace of metro markets.
Home values across Regional Victoria rose +1.6 per cent, against the relatively modest +0.4 per cent increase in home values across Melbourne.
REIV data indicates regional markets posted the highest quarterly growth since 2003, with house values up +9.2 per cent from the September quarter, for +7.5 per cent annual growth.
Regional Victorian unit prices grew more modestly - +3.5 per cent - over the quarter, but advanced +10.3 per cent for the YTD.
Victorian rental market update
Unit rents in Melbourne have dropped -7.8 per cent over the past year, but CoreLogic data shows that, ‘the rate of decline is easing’, with rents holding firm over January.
House rents have been less volatile up 0.8 per cent over the same timeframe.
Gross rental yields in Melbourne metro are currently 3.1 per cent, with regional Victoria at 4.3 per cent.
Overall there has been more pressure on units, with higher density housing markets experiencing a reduction in demand due to the pandemic.
With international borders shut, overseas migration frozen and remote working now more accepted, only time will tell when this trend will be reversed or if it will revert to pre-COVID conditions.
The outlook for 2021
With a new year ahead of us what can we expect from 2021 for the Melbourne and Victorian housing market? Let’s see what real estate experts are projecting.
In terms of the big picture, CoreLogic believes that, ‘...the Australian economic recovery consistently outperforms forecasts’. Their positivity is based around the following factors:
Employment data is encouraging despite JobKeeper winding down
Mortgage repayment deferrals have reduced to just 2.4% of all mortgages
Buyer activity is well above average, even though overseas migration is at a standstill
They also point out that low interest rates continue to be, ‘a key factor in supporting the housing market recovery’.
Property investor and analyst Michael Yardney is also holding a glass half-full when it comes to 2021, citing:
Improving consumer and business confidence
Low COVID numbers
Strong auction clearance rates
Increased buyer and seller activity
Transaction numbers increasing
He believes, ‘Melbourne property values are likely to increase by +5 per cent to +7 per cent in 2021, with ‘A grade homes’ and ‘investment grade properties’, ‘likely to exhibit double-digit capital growth’.