Property market update: Melbourne, November 2021

By Zarah Mae Torrazo 21 December 2021 | 1 minute read

Melbourne’s housing market ended the spring selling season with a bang as the Victorian capital saw listings surge and auction volumes hit record highs post-lockdown.   


As Australia’s capital cities rebound from lockdowns and restrictions brought on by the Delta variant, Melbourne’s property market activity rebounded post-lockdown as listings and auction volumes surged in November. 

During the month, the Victorian capital also saw average house prices climb near the $1 million mark and is now on the cusp of joining Sydney houses in the million-dollar club. 

But despite the city ending the spring selling season on a solid note, experts highlighted that Melbourne’s property market is still losing steam. 

Data from CoreLogic showed that Melbourne’s monthly rate of growth had now halved since the highs recorded in March 2021, when dwelling prices reached a monthly growth rate of 2.4 per cent – the fastest four-week increase the city has experienced in over three decades.

CoreLogic research director Tim Lawless said the slowdown in the pace of growth in the Victorian capital was due to a number of reasons. 

Speaking on Melbourne’s tapering growth, the expert said: “Virtually every factor that has driven housing values higher has lost some potency over recent months.” 

Mr Lawless said that conditions underpinning growth had slowed sharply, with the sudden rise in new listings and affordability pressures weighing down the city’s market. 

“Fixed mortgage rates are rising, higher listings are taking some urgency away from buyers, affordability has become a more substantial barrier to entry and credit is less available,” he explained.

While the loss in Melbourne’s momentum is expected to continue in the near future, Mr Lawless said that the steam from the recent property boom has not run out yet. On the contrary, he believes the boom still has a long way to go. 

“The heat’s come out of the market but it’s still a hot market,” he said. “The boom isn’t over. Even in Melbourne and Sydney, where it’s slowed, you’re still seeing values rise 1 per cent in a month.” 

He further argued that while the market has slowed, the rate is still “well above average”. 

With the year-end just a few weeks away, several market commentators ranging from banks to industry experts are now giving their forecasts of how Australia’s property markets will fare in 2022. 

Before diving deeper into the outlook for the Victorian capital, let’s see how the Melbourne market performed in November 2021. 

Property values 

According to CoreLogic, Melbourne’s property values rose 0.6 per cent in November, a modest lift from October’s result, when dwelling values grew at a rate of 1 per cent. 

Melbourne’s dwelling prices have increased by 16.3 per cent in the past year, with the median price now at $788,484.  

Both the unit and housing segments of the city’s market posted a 0.6 per cent and 0.5 per cent monthly increase in November, respectively. The figures are down from the 1 per cent gains both sectors notched in October. 

CoreLogic noted that capital cities’ unit markets have continued to record a lower rate of growth relative to houses throughout the pandemic, with this trend most noticeable in the annual results.

Compared to the same period last year, house prices in the city have risen by 19.5 per cent, with the median house prices now at $986,992. 

Meanwhile, units have risen by 9 per cent over the same period, with the median price for units in the Victorian capital now at $626,449. 

So far, a typical Melbourne house is now about $187,000 more expensive than it was in January 2021, while units have experienced a gain of $49,000.

But Mr Lawless predicts a shift in consumer preference in the near future, as affordability pressures take their toll on home buyers. 

“With such a large value gap between the broad housing types, it’s no wonder we are seeing demand gradually transition towards higher density housing options simply because they are substantially more affordable than buying a house,” he said.

Supply and demand  

Total property listings across Melbourne normalised in November. According to CoreLogic, stock levels across Melbourne are now just sitting 7.9 per cent above the five-year average. This comes following a period in which there had been a shortage of properties listed for sale in the Victorian capital. 

“There’s slowing momentum across Sydney and Melbourne in particular, which is reflective of the fact that stock levels across those cities have pretty well normalised,” CoreLogic’s head of residential research Australia, Eliza Owen, said.

She added that it was possible that some of the increase in the big-city listings related to Sydneysiders and Melburnians selling up to move elsewhere, but the expert also highlighted an increase in the number of property investors selling.

“We have seen a lot of the increase in for-sale listings coming from some of the more concentrated investor markets in the inner cities as well,” she said.

Ms Owen also noted the increase in listings in the city could be reflective of investors looking to exit the market at what they perceive to be its peak level. She added it could be a reaction to the recent increase in lending buffers by APRA, as investors took the regulator’s move as an indication of further tightening in lending conditions in the future. 

SQM’s data showed that Melbourne listings fell 3.4 per cent over the month from 41,265 in October to 39,880 in November. Compared to the same period last year, listings in the city are still down 10.6 per cent.  

According to Louis Christopher, managing director of SQM Research, the declines were expected following a surge in listings in October. Last month, the Victorian capital saw a staggering 25.1 per cent increase in listings. 

“Just like this time last year, vendors are keen to sell before Christmas but in greater numbers. Perhaps it is due to the lockups of July to October. It could also be due to more vendors believing we are at the top of the market in our two largest cities,” he stated. 

In conclusion, he said: “Either way, selling activity remains very strong and will remain very strong right up to Christmas.” 

Meanwhile, Mr Lawless said that the increase in supply in the market is easing the FOMO that has fuelled the market boom in 2021. 

“Fresh listings are being added to the market faster than they can be absorbed, pushing total active listings higher,” he stated. More listings imply more choice and less urgency for buyers.”

Mr Lawless expects inventory levels to continue to normalise into 2022 and result in markets shifting from a seller’s market to a buyer’s market, where buyers have greater negotiating powers.  

“As listings rise, we are also seeing a subtle softening in vendor metrics such as the median number of days it takes to sell a property and auction clearance rates,” he noted.

Auction rates  

Melbourne’s auction market strongly rebounded in November as a reaction to being free from a series of snap lockdowns and having onsite auctions once more. 

According to CoreLogic, the city’s monthly auction clearance rate for November stood at a healthy 71.8 per cent, following October – the strongest month for 2021 with 79.7 per cent of auctions held resulting in a sale that month.

Meanwhile, Domain data showed the Victorian capital’s clearance rates had fallen in November, ending two consecutive months of growth, falling from 72.6 per cent to 71 per cent.

The dip coincides with the significant growth in listings in October and November and a full month of onsite inspections and auctions post lockdown. Domain’s data showed a staggering 6,098 homes were scheduled to go under the hammer during the month, resulting in some of the city’s busiest auction weeks in 2021. 

Domain’s senior research analyst Nicola Powell called Melbourne “the auction capital of Australia”.  

With the rebound in Melbourne’s auction market activity in November, the expert forecast: “So I think what we’re going to see over the next couple of weekends is a real test of seller pricing, as well as the depths of buyer activity and whether there are enough buyers out there to really absorb this level of auctions going to market.” 

Commonwealth Bank head of Australian economics Gareth Aird said the proportion of homes selling in the last few weeks had softened.

“[Auction clearance rates are] still very strong, albeit they have moderated a little bit in recent weeks,” Aird said.

“At some point, things start to slow a bit, and we’re probably at that point now. I think the other thing that’s important to note is that in recent weeks banks have been lifting interest rates on fixed-rate mortgages, which will exert a cooling effect on property prices.”

While demand for Melbourne real estate remained strong and homes continued to sell like hotcakes at buoyant prices, there are signs of a less frenetic pace of growth starting to emerge in some pockets areas as home buyers have more listing options to choose from. 

Data from Ray White showed the average number of bidders at auctions in the city dropped to 4.9, with only 3.1 making offers, which is the lowest level of active bidders since October last year and down from a peak of 8.4 registered and four active bidders in September.

Meanwhile, Domain reported Melbourne’s median auction price for houses fell 1.9 per cent in November to $1.21 million. However, the figures are still 11.5 per cent higher than a year earlier.

For units, the median auction price rose 12.4 per cent year-over-year to $739,500 and down marginally from October by 0.1 per cent.

The drop in average house auction prices comes as buyers enjoyed more choice post-lockdown when a wave of owners listed their homes for sale after being delayed through the winter and early spring by COVID-19 restrictions.

Dr Powell noted that the easing FOMO sentiment among consumers also means that buyers are now less likely to pay over the odds of securing a property if they are assured that the “next opportunity is around the corner”. 

“The sentiment of a buyer is changing, they’re more wary of not overpaying for a home,” according to Dr Powell. 

If you want to be in the know about Australia’s auction market, follow our weekly updates in our News section

Rental market 

Melbourne’s rental market has suffered the effects of COVID-19 lockdowns more than any other capital, coming off record-high rents in March last year.

And while rents in the city continued to lag behind its other capital city peers in November, landlords in the city are hopeful that things will turn a corner with the reopening of international borders, which is seen to revive demand for the city’s rental houses and units. 

At an annual rate, house rents in Melbourne rose by 4.7 per cent in November, slightly higher than the 4.5 per cent in October. Meanwhile, unit rents staged another 1.7 per cent increase in November, fully recovering from the 1.2 per cent decline in September and significantly higher than the 0.2 per cent gain in October. 

CoreLogic data showed that Melbourne is the only city where unit rents have risen at a faster pace than house rents over the last five months. 

While rents across capital cities are rising, gross rental yields have continued to diminish in November as dwelling values continued to rise, falling to a new record low of 3.23 per cent. Melbourne showed one of the lowest rental returns among capital markets with 2.7 per cent, only beating out Sydney with 2.4 per cent. 

“Gross rental yields reached a new record low across every capital city and broad rest-of-state region in November implying a growing imbalance between the costs associated with owning a home versus renting a home,” Mr Lawless said. 

“With mortgage rates also extremely low, such a small yield profile is not overly concerning at the moment, however as investment activity increases along with the growing potential for higher interest rates, we could see more investors once again relying on a negative gearing strategy over the medium to long term.” 

Vacancy rates 

Domain data showed Melbourne’s rental vacancies fell from a rate of 3.1 per cent in October to 3 per cent in November, its lowest point since June 2020.

The easing of the latest lockdown and the ability to conduct onsite rental inspections resulted in the third consecutive month of decline, according to Domain.

And while rates still remain elevated, they are gradually decreasing from the August high of 3.6 per cent. This downward trend, along with a 4.2 per cent month-on-month fall in rental listings, could see Melbourne’s rental market eventually become a landlord’s one, which Domain sees as a real possibility once international borders reopen. 

Data showed that the areas with the highest vacancy rates in the city were Stonnington – East (6.3 per cent), Stonnington – West (5.1 per cent), Melbourne City (5.1 per cent), Whitehorse – West (5 per cent), and Boroondara (4.6 per cent).

Meanwhile, the areas with the lowest vacancy rates were MorningtonMornington, VIC Mornington, QLD Mornington, TAS Peninsula (0.2 per cent), Cardinia (0.4 per cent), Yarra Ranges (0.4 per cent), Frankston (0.5 per cent), and Macedon Ranges (0.6 per cent). 

What’s next for Melbourne’s property market? 

While most experts concur that Melbourne’s property market would continue to rise, albeit at a milder rate in 2022, their predictions as to when and by how much prices will decline largely vary. 

For CoreLogic experts, house prices are tipped to fall as interest rates rise. 

“The cue for the market to go down is when rate rises happen,” Mr Lawless said.

Citing forecasts of price declines in 2023 given by big bank and other analysts, Ms Owen said: It makes sense that we would see downward pressure on prices in response to increased interest rates, especially given that interest rates seems to have been one of the major drivers of the current upswing,” she told ABC News.

“I think the extent of the downturn and the timing of the downturn really does come back to when the RBA would make moves on the cash rate.” 

She also noted that average fixed rates are now rising for new borrowers, which is seen to exert downward pressure on demand in the coming months as well. 

She also highlighted that affordability, or rather the lack of it, is also seen to put a stop to the latest housing boom.

“The slowdown in growth rates is likely being triggered by affordability constraints, and the higher levels of new listings being added to the market in recent weeks.

“The volatility at the high end of the market, demonstrated by the rapid decline in growth rates, suggests this segment can also expect a larger downturn in property values,” she concluded.

Meanwhile, big banks generally agree that rates will continue to rise in 2022 and will start to correct in 2023. 

For ANZ, the bank said it expects Melbourne’s house prices to lift by a further 7 per cent over the course of next year.

CBA sees the Victorian capital’s property prices to rise by 8 per cent in 2022 before sliding 10 per cent in 2023. NAB is currently forecasting house price growth of around 5 per cent for Australia’s capitals in 2022, with apartment price growth likely to be a bit more subdued in Melbourne.

Westpac is expecting Melbourne dwelling values to rise 8 per cent in 2022 before dipping by 6 per cent in 2023.

Meanwhile, AMP Capital chief economist Shane Oliver is more bearish and is expecting a decline in prices as early as next year. 

“I think house prices will start to fall by the end of next year if we get rate hikes on top of further increases in fixed mortgage rates,” he stated. 

“We’re looking for two rate rises next year which will take the official rate to 0.5 per cent by the end of the year.

“In the grand scheme of things, that’s relatively modest, but then we probably get more hikes as we go through 2023 and then ultimately combining that with higher fixed rates, then that will put downward pressure on prices.”

Looking to kick off your investment property journey next year? If you’re a first-time buyer looking to enter the real estate market, check out Smart Property Investment’s brand-new white paper, Why 2022 is the right year to invest for beginners.  



Property refers to either a tangible or intangible item that an individual or business has legal rights or ownership of, such as houses, cars, stocks or bond certificates.

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Property market update: Melbourne, November 2021
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