Property market update: Melbourne, June 2020

1 minute read

Property market update: Melbourne, June 2020

by Bianca Dabu 08 July 2020 1 minute read

As the world adapts to a “new normal” following the COVID-19 outbreak, find out how the Melbourne property market will fare in the coming months.

July 08, 2020

La Trobe Financial chief investment officer Chris Andrews said that the Victorian capital market remains slightly behind other capital city markets in terms of recovery from the outcomes of the most recent pandemic.

While the month-to-month market figures for each of the capital cities have jumped around a bit, “Melbourne is one area suffering a little more from coronavirus,” according to him.

“Where Sydney was down 0.4 per cent in May, Melbourne was down 0.9 per cent. So it varies from geography to geography,” Mr Andrews explained.

“But the real driver of that is what is going on with coronavirus. In the medium term, however, it will be more about the diversity and strength of the underlying economy.”


In the short-term, La Trobe Financial predicts an 8 to 12 per cent correction for house prices.

Still, Mr Andrews believes this to be “normal [midair] turbulence” for the housing market. At the end of the day, there’s no real cause for concern in house prices, especially in major markets.

“In the median term, housing remains a key consumption item for everyone. Everyone needs somewhere to live. We’re not seeing any evidence to suggest long-term structural difficulties. In fact, we’re likely to see solid growth as the economy recovers,” he said.

Property values

Following 11 months of gains, dwellings have been reduced by more than a per cent following 0.4 per cent in May before falling a further 0.7 per cent in June.

The CoreLogic Home Value Index for June shows that Sydney property values fell 0.8 per cent over the month, while Melbourne values dipped by 1.1 per cent, Brisbane by 0.4 per cent and Adelaide by 0.2 per cent.

Over the June quarter, Melbourne values fell by 2.3 per cent, the largest drop of all capital cities for the quarter.

Meanwhile, prices in Hobart and Darwin grew by 0.3 per cent and Canberra by 0.1 per cent, but these were not enough to move property into positive territory as national dwelling values fell by 1.3 percent over the past two months.

Mr Andrews pointed out that these recent dips in property values are against the backdrop of some substantial gains over the past 12 months, with the CoreLogic data for June indicating a 13.3 per cent increase in property values in Sydney over the past year and a 10.2 per cent increase for Melbourne.

Further, CoreLogic’s head of research Tim Lawless, noted that the market is currently being aided by government support and loan deferrals that will run out.

“Another key risk relates to the eventual removal of stimulus measures and borrower repayment holidays. Eventually, the economy and borrowers will need to abide by market forces. This is when we could see a rise in mortgage arrears and the potential for a lift in urgent or forced sales,” he said.

Corelogic’s research also found that more expensive properties are seeing the biggest swings during the COVID-19 market correction.

Over the past three months, upper quartile values went down by 1.7 per cent across the combined capital city index, while lower quartile values have fallen by only 0.3 per cent.

This capital city trend is driven mostly by Sydney and Melbourne, while the smaller cities have shown a mixed result across the valuation cohorts.

In Sydney, the upper quartile is down by 1.3 per cent over the past three months, while lower quartile values are up by 0.2 per cent. Similarly, over the same period in Melbourne, upper quartile values are down by 3.7 per cent, while lower quartile values have declined a more modest 0.5 per cent.

Mr Lawless noted, however, that “importantly, the upper quartile also recorded the most significant run-up in values throughout the second half of last year.”

In response to uncertainty, metro areas saw the largest drop in vendor happiness, according to the results of RateMyAgent’s Price Expectation Report.

Robust property markets in Melbourne and Sydney saw declines of 10 per cent to 16 per cent, respectively. While regional areas in Victoria and Queensland saw a reduction in vendor happiness between 4 and 1 per cent.

Contrary to this, property markets in Queensland (4 per cent), South Australia (1 per cent) and Western Australia (1 per cent) have initially seen a steady increase in price satisfaction, with the remainder of Q2’s results to determine the full impact on the real estate market.

The decrease in unhappiness was seen across all price segments, but most dramatically across the premium end of the market, which consists of home sellers with property valued at more than $1.5 million. In April, these vendors saw a 21 per cent decrease in price satisfaction, reducing the total of happy sellers from 46 per cent to 25 per cent.

The results revealed the ACT as the happiest state (45 per cent), with joint second place going to Victoria and South Australia (40 per cent), followed by Tasmania (39 per cent), and NSW and Queensland (37 per cent), and trailing last, Western Australia (27 per cent).

Supply and demand

Auction clearance levels and volumes are now starting to return to normal levels, although Melbourne is still slightly behind, according to Mr Andrews.

CoreLogic’s latest Property Market Indicator Summary has revealed that for the week ending 28 June 2020, there were 1,424 homes scheduled for auction across the combined capital cities. The volumes have returned a preliminary auction clearance rate of 64.5 per cent.

“This was the highest number of auctions held in nine weeks, demonstrating an ongoing improvement in seller confidence as auction clearance rates hold reasonably firm under higher volumes,” CoreLogic said.

Sydney saw the largest volume of auctions during this week, with 614 homes going under the hammer over the week, returning a preliminary clearance rate of 66.9 per cent⁠ – just slightly below the 67.9 per cent clearance rate from the same time last year.

Meanwhile, there were 623 Melbourne homes scheduled for auction this week, returning a preliminary auction clearance rate of 62.7 per cent⁠ – lower compared to the 68.7 per cent clearance rate for the same time last year.

Still, despite the economic risks and the market reducing, Mr Lawless highlighted some green shoots for property investors.

“With real estate agent activity bouncing back, the number of fresh real estate listings has been ramping up since early May. The rolling 28-day count of new listings remained lower than a year ago, but was 42 per cent higher relative to the recent low in early May,” according to him.

“While new listings are ramping up, the total listing count has continued to trend lower, indicating a strong rate of absorption.”

Further, auction markets have shown a partial recovery, with the combined capital city clearance rate averaging 59.9 per cent since mid-May.

Clearance rates reached a record low of 30.2 per cent through April as a result of the temporary ban of on-site auctions.

2020 outlook

Domain economist Trent Wiltshire said that there could be two likely scenarios to play out for the Australian property market in the remaining six months of the year as a result of the COVID-19 outbreak.

The first possible outcome would be modest price falls, while the second would be a slow pick-up in property sales.

“The most likely outlook for property is for prices to fall modestly in some areas and be broadly steady in others, combined with a slow increase in transactions from weak levels,” Mr Wiltshire explained.

“The key factor supporting prices so far is that few people have been forced to sell their homes due to losing their jobs or having their incomes cut. This has been enabled by the government’s financial support packages assisting households whose income has fallen, in combination with banks allowing people in financial difficulties to defer mortgage repayments.

“The Westpac-Melbourne Institute consumer survey data indicates that while people think it might be a good time to buy, there is no rush because they think prices may fall a bit further. This suggests sales volumes will remain sluggish for the next few months.”

PerthPerth, TAS Perth, WA, Adelaide and Canberra are the property markets most likely to rebound fastest as prices are expected to grow at a modest pace and sales activity should pick up. Couple this with the fact that there are few or no COVID-19 cases in these cities, investors can rest assured that the local economies should be able to operate fairly normally.

Moving forward, holiday and coastal areas near capital cities may become more popular with people more able to work from home.

However, Mr Wiltshire noted this factor might be more than offset by people selling holiday homes due to a fall in their incomes.

Inner-city Sydney and inner-city Melbourne, in particular, look to be most at risk of price falls due to having a large proportion of renters and also due to significant job losses, particularly in hospitality.

“These inner-city areas are also where a large number of international students typically live. But with borders closed and universities teaching online, international student numbers have fallen substantially,” he highlighted.

“Asking rents in inner-city Sydney and Melbourne have fallen by about 6 per cent in the June quarter, whereas the outer suburbs have held up reasonably well. Falling rents and rising vacancy rates [mean] many investors may sell, which will push down prices.”

Despite uncertainties, experts remind investors that the Australian property market is extraordinarily resilient.

According to Binnari Property’s managing director David Hancock, when Australia experienced similar economic and political shocks to the system such as the GFC, Y2K, September 11 and the banking royal commission, the Sydney, Melbourne and Brisbane markets experienced only small dips and recovered relatively quickly.

In fact, commentators who were predicting severe 20-30 per cent drops in the property market this year are now largely walking back on their forecasts. AMP Capital chief economist Shane Oliver, who was forecasting falls of 20 per cent, has now revised that to falls of 5-10 per cent.

“During times of uncertainty, a drop in buyers is typically matched with a decrease in supply, which allows property values to hold firm. That means that any drop in prices is likely to be minor and short-lived. In any event, property transactions will continue as people buy their first home, upsize, downsize or look for ways to invest outside of the sharemarket,” Mr Hancock said.

Further, as Australia is faring much better than many countries when it comes to managing the COVID-19 pandemic and with even the most dire economic forecasts predicting a recovery as soon as next year, the country is expected to be an attractive and stable economy in which to invest and a secure and safe place to live.

This will lead to an influx of migrants and foreign investors from all over the world, including the UK, US, South Africa and Hong Kong.

According to Mr Hancock: “It is unlikely that the Australian property market will sustain any long-term falls due to a combination of migration, foreign investment and government intervention. Many markets across Australia also have low supply with demand likely to continue to grow.”


For those in a position to invest in terms of financing, Upside Realty CEO Adam Rigby advised jumping on any potential investment opportunities available.

According to him, the property market is generally in “a period of relative stability right now”.

“[But] all the markets are a little bit different still, so it really does depend where you are. That’s where a savvy buyer, if they know the market – they’ve been monitoring the different markets and they’ve seen ‘ah Melbourne’s been hit particularly hard’ – they might be able to snap up a bargain in Melbourne, as an example,” he explained.

For anyone who is cashed-up or has the resources, Mr Rigby encouraged buys, especially in the coming six months, when there could be a wide variety of availability, “from new developments through to high density”.

Advising property purchasers to buy high-quality stock, he said: “Don’t get caught up into buying something that’s been hit hardest on price, because usually there’s a reason… Keep your powder dry.”

“Try to make sure you buy high quality, and if you can get something that’s 5 to 10 per cent off the normal price that might have sold pre-2019, that might be a great buy. Look for those in the coming six months,” Mr Rigby highlighted.

“If quality stock comes up, do jump on it… Picking quality is easier.”


The federal government recently announced a new $688 million housing stimulus package aimed at reviving property market activity.

Under the Morrison government’s HomeBuilder package, a $25,000 grant will be available to owner-occupiers “substantially renovating” or building a new home from 4 June to 31 December 2020.

A national price cap of $750,000 has been set for new home builds, and a renovation price range of $150,000 to $750,000 will apply to renovating an existing home with a current value of no more than $1.5 million.

The grants will also be means-tested, with the government setting income caps of $125,000 for singles and $200,000 for couples. An applicant’s eligibility will be based on their latest assessable income.

The government has estimated that approximately 27,000 grants would be handed out as part of the package across $10 billion in building projects, supporting 140,000 direct jobs and another 1,000,000 related jobs in the residential construction sector.

The top region by eligible HomeBuilder properties is Melbourne south-east, with 157,364 properties worth less than $1.5 million, followed by Perth north-west at 145,889 and Melbourne - west at 141,444 properties, according to new research by CoreLogic.

Melbourne appeared two more times on the list, with Melbourne outer-east ranked fifth with 130,307 properties and Melbourne north-east at 108,354 properties.

“The data suggests that the highest number of owner-occupied properties is located in the Melbourne south-east region, which spans from Mount [WaverleyWaverley, NSW Waverley, TAS] out to Bunyip,” CoreLogic head of research Eliza Owen said.

“In fact, there are four Melbourne regions that have over 100,000 owner-occupied properties estimated to be valued under $1.5 million. These regions represent the fringe of the metropolitan area, and include some relatively low-income areas compared to the inner-city regions of Melbourne.”

According to CoreLogic estimates, there are about 4.4 million owner-occupied properties across Australia with a high confidence valuation below $1.5 million, but the federal government estimates that the scheme may only support about 7,000 renovations.


Track the major market movements in Melbourne and get to know more about the capital city’s growth drivers and hotspots through Smart Property Investment’s April 2018May 2018June 2018July 2018August 2018September 2018October 2018November 2018December 2018January 2019February 2019March 2019April 2019May 2019June 2019July 2019August 2019September 2019October 2019November 2019December 2019January 2020February 2020March 2020April 2020 and May 2020 market updates.

Visit Smart Property Investment’s Property Market News page to get updates on other major capital cities.

Property market update: Melbourne, June 2020
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Bianca Dabu

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