Property market update: Melbourne, February 2022

By Zarah Mae Torrazo 12 March 2022 | 1 minute read

Melbourne saw growth ground to a halt in February, as the city’s median dwelling values remained unchanged over the month. Has the Victorian capital hit a turning point, or will it be able to shake off the slowdown come autumn? 


Melbourne’s property market hit a wall in February, as factors including rising supply, growing headwinds, and weaker consumer sentiment put a damper on the Victorian capital’s growth.

Some experts surmise that this could be the beginning of the end of property price peaks in the city. 

CoreLogic research director Tim Lawless said: “With rising global uncertainty and the potential for weaker consumer sentiment amidst tighter monetary policy settings, the downside risk for housing markets has become more pronounced.”

In its latest report, CoreLogic noted that the housing market began winding down in April 2021 as fixed-term mortgage rates began to increase and fiscal support ended.

Mr Lawless said that while every capital city and broad rest of state” region is now recording a slowing trend in value growth, he singled out Sydney and Melbourne for recording the steepest declines. 

“Sydney and Melbourne have shown the sharpest slowdown, with Sydney posting the first decline in housing values since September 2020, while Melbourne housing values were unchanged over the month, following similar results in December and January,” he said. 

Meanwhile, Commonwealth Bank head of Australian economics Gareth Aird said dwelling prices have likely peaked in the two largest capitals.

“The context of what’s happened last year with this phenomenon of surging prices meant prices had to top out,” he said.

“With talk about rates rising, and the Reserve Bank raising interest rates, that’s going to affect what people are willing to pay for a home,” the economist added. 

Banks have been lifting fixed mortgage rates, even though the RBA has not yet raised the cash rate. 

“Fixed rates have been increasing for about nine months,” AMP Capital chief economist Shane Oliver said.

“So you could tick off – we’ve seen a deterioration in affordability that squeezes out more buyers, and we’ve seen a move towards higher interest rates in fixed rates,” he added.

RateCity’s database on home loans shows there are 11 fixed rates available under 2 per cent, of which 10 are one-year terms. For comparison, in April 2021, there were about 180 fixed rate options under 2 per cent.

Most economists do not expect the central bank to increase official interest rates until June at the earliest. RBA governor Philip Lowe has stated that the central bank is prepared to be patient to ensure sustained wage growth before increasing rates.

However, once the cash rate rises, several economists expect reduced home buyer budgets could push property prices lower.

Meanwhile, Mr Lawless commented that the slower growth conditions in Australian housing values go well beyond the rising expectation of interest rate hikes later this year. 

Echoing this observation, CoreLogic’s head of Australian research Eliza Owen stated that even before the RBA raised the country’s cash rate, headwinds have been brewing for the housing market. 

“These come in the form of affordability constraints, higher levels of listings that are coming onto the market – particularly in Sydney [and] Melbourne – as well as a lift in the fixed mortgage rate space,” she said. 

Will Melbourne stage a rebound in the coming months, or has the Victorian capital truly peaked? For now, let’s see how the city’s market performed in February 2022. 

Property values

CoreLogic’s latest data showed dwelling values in Melbourne were unchanged over February, slowing down from the 0.2 per cent monthly gain seen in January. 

On a quarterly basis, property values are up by just 0.2 per cent, significantly lower than the 0.8 per cent recorded in the previous three-month period. 

Currently, the median price of a property in the city (based on sales of units, townhouses and houses) is $799,756 – indicating a less than $1,000 monthly increase in dwelling values. 

Compared to the same period last year, property prices are now up by 12.5 per cent. 

Melbourne’s unit sector outperformed the housing sector during the month. Data showed median house values in Melbourne were unchanged over February, winding down from the 0.5 per cent increase seen in January.

The median value of a house in the city stood at $998,356 in February, indicating a decline of $4,100 during the period and effectively ending Melbourne’s short-lived stay in the million-dollar house price tag club.

Meanwhile, the unit sector managed to eke out some gains during the period, as apartment values rose 0.1 per cent in February, rebounding from the 0.4 per cent decline seen in the previous month.  

Compared to February 2021, unit values are up by 7 per cent. The sector’s median price is now at $626,042, representing an increase of almost $2,000 in average apartment values over the month. 

Supply and demand

Property buyers in Melbourne have the most choice they’ve had in years amid a surge in listings at the start of 2022. 

Data from SQM Research showed total residential listings in Melbourne rose by 12.8 per cent in February to 34,697 from 30,770 in January. 

The monthly jump in stocks was one of the biggest among capital cities, coming in third place behind Canberra and Sydney, which were up 24.1 per cent and 19.6 per cent, respectively, during the period. 

Compared to February 2021, the total number of properties for sale in the Victorian capital is still down by 9.2 per cent. 

New listings (or properties that have been on the market less than 30 days) in Melbourne saw an increase of 76.7 per cent from 9,398 in January to 16,607 in February. Compared to the same period last year, new listings in the city are down by 3.6 per cent. 

Meanwhile, data showed that old listings or property listings over 180 days fell by 4.6 per cent from 6,446 in January to 6,150 in February. Year on year, old listings have fallen by 29.1 per cent. 

Weighing in on the recent data, SQM Research managing director Louis Christopher said the monthly surge in listings reflected the urgency of vendors to cash in profits after the record price gains in 2021.

“We could see the upward trend in listings continue through the first half of the year as more sellers seek to take profits,” he said.

But the expert also noted that the national housing market appears to remain reasonably buoyant, stating: “[Overall], supply remains below long-term averages and we are still recording capital city rises in asking prices.”

Over the month to 1 March 2022, Melbourne’s asking prices were down by 0.5 per cent for houses but 1.5 per cent for units. Compared to the same year, houses and units are up 13.3 per cent and 1.2 per cent, respectively. 

According to CoreLogic, the supply levels in capital cities help explain the divergence in housing growth trends. When looking at Australia’s four largest capital city markets, the correlation between advertised stock and current price growth is abundantly clear.

Mr Lawless said that “the cities where housing values are rising more rapidly continue to show a clear lack of available properties to purchase”.

“Total listings across Brisbane and Adelaide remain more than 20 per cent lower than a year ago and more than 40 per cent below the previous five-year average,” Mr Lawless explained. 

For Sydney and Melbourne, total supply levels have returned to what CoreLogic calls more normal levels”, which is playing a big part in growth easing in those two markets. 

In Melbourne, data revealed advertised stock levels are now above average, tracking 5.5 per cent higher than a year ago and 4.7 per cent above the previous five-year average. 

Mr Lawless said the increase in options translates to less urgency or FOMO among buyers and allows them to wield power at the negotiation table. 

CoreLogic also noted that in addition to the increase in new listings in Sydney and Melbourne, demand is also easing due to affordability pressures, higher mortgage rates and a general weakening in consumer sentiment. 

As new listings rise and total stock on Melbourne’s market approaches normal or above-average levels, the balance of power is expected to shift in favour of buyers. For now, CoreLogic noted that sellers still have the upper hand in the city’s market.

Auction markets

While the traditionally slow February saw an unusually high number of Melbourne properties going under the hammer, data showed clearance rates have continued to slow as a result of increased volumes and reduced competition. 

CoreLogic reported that a total of 4,518 properties went under the hammer in the Victorian capital throughout the month, with a final average clearance rate of 71.3 per cent. 

Despite the strong weekly volume, CoreLogic noted that clearance rates clocked in relatively lower compared to the same period last year. 

Last month, weekly final clearance rates in the city ranged between 67 per cent and 74 per cent. In February 2021, final clearance rates in the Victorian capital were recorded to be as low as 70 per cent and as high as 76 per cent. 

Meanwhile, Domain’s latest auction report showed Melbourne had the highest number of auction listings for February since its records began.

Over the month, 4,181 auctions were scheduled in Melbourne, with a clearance rate of 69 per cent, down from 73.1 per cent a year ago.  

Clearance rates for houses and units were 70.6 per cent and 63.2 per cent, respectively. 

Domain noted that supply continues to enter the market in the new year, highlighting that sellers are being strategic with their market timing, listing homes for sale while selling conditions remain positive and the perception prices are at or close to a peak. 

Some vendors may also be timing a sale before interest rates rise or further macro-prudential measures are placed, which will take more wind out of demand, according to Domain. 

Follow our weekly updates in Smart Property Investment’s News section to make sure you stay on top of the latest auction market reports. 

Rental market

Over February, SQM Research reported that Melbourne’s asking rents grew by 1 per cent for houses to $548 per week, and 2.8 per cent for units, reaching $395 a week.

Compared to February 2021, average weekly rents for houses and units in the city have risen by 6.5 per cent and 5.9 per cent, respectively.

According to Mr Christopher, the increase in rental prices is expected to surge over the year due to “an acute shortage of rental properties”. 

“[The] shortage has already been translating into large surges in weekly rents across the country. It is now very likely market rents will rise by over 10 per cent this year,” he forecast. He also warned that if rents continue to rise at its current pace, there would be major ramifications for core and headline inflation.

SQM Research also forecasts that the relaxation of international border restrictions on 21 February is also seen to put more upwards pressure on rents. 

Meanwhile, Melbourne house and unit rents rose year-on-year by 8.7 per cent and 8 per cent, respectively, according to CoreLogic. 

Additionally, the property data provider noted that over the rolling quarter, the unit sector had shown stronger growth in rents compared to houses. 

Mr Lawless explained that a rise in rental returns is being led by Sydney and Melbourne, where vacancies have dropped substantially. 

“Anecdotally, demand for unit rentals in these cities has been bolstered by a combination of worsening rental affordability deflecting more demand towards the higher density sector, where rents tend to be lower and demand starting to return from overseas arrivals,” the expert said. 

With the rate of growth in housing values softening while rental growth holds reasonably firm, CoreLogic noted that the national level of gross rental yields stabilised during the month at 3.2 per cent. 

Sydney and Melbourne remained the only capitals where gross yields are averaging below 3 per cent. Melbourne’s gross rental yields stood at 2.8 per cent at the end of the month. 

Vacancy rates 

Melbourne tenants looking for a new rental are facing more competition, as new figures from Domain revealed vacancy rates have tightened dramatically over the year.

Melbourne’s vacancy rate stood at 2.1 per cent in February, down from the 4.4 per cent recorded at the same time in 2021. 

The February rate was also slightly down on January’s figures, where the rate was at 2.4 per cent.

The areas with the highest vacancy rates in Melbourne were Stonnington – East (4 per cent), Whitehorse – West (3.8 per cent), Banyule (3.3 per cent), Boroondara (3.3 per cent), and Maribyrnong (3.2 per cent). 

Meanwhile, the areas with the lowest vacancy rates were Yarra Ranges (0.3 per cent), Cardinia (0.3 per cent), MorningtonMornington, VIC Mornington, QLD Mornington, TAS Peninsula (0.5 per cent), Nillumbik – Kinglake (0.5 per cent) and Sunbury (0.6 per cent). 

According to Domain chief of research and economics Dr Nicola Powell, some areas of Melbourne with extremely tight rental vacancy rates, such as the Mornington Peninsula, the Yarra Ranges and BayswaterBayswater, WA Bayswater, VICBassendean, were on the brink of a worsening rental crisis.

“Some are in a rental crisis because they have vacancy rates that are really, really, low, but that’s not true of all of Melbourne. It’s a patchwork of a rental market,” Dr Powell commented.

Domain also warned that Australia is on the verge of a rental crisis, as rental demand will continue to sharply rebound following the full reopening of international borders to double-vaccinated visa holders and tourists, following two years of closures. 

The resurgence in rental demand will predominantly be in Sydney and Melbourne, the two cities to see the biggest drop in vacancy rates over February. 

Given that Sydney and Melbourne have historically welcomed more overseas migrants, as well as being popular tourist destinations, Domain expects demand for rentals in the two biggest cities will continue to spiral. 

On top of strong demand, rental stock continued to trend lower across capital cities, consistent with increased demand seen in January absorbing availability. Data showed vacant rentals in Melbourne fell 15.1 per cent to just under 11,000. 

Some rentals had also been sold to owner-occupiers, taking them out of the rental market, while others were being put on short-term holiday rental websites like Airbnb.

As rental supply continues to tighten, Domain forecasts market conditions will continue to swing in favour of landlords, which in turn would further support potential rental price increases.

Outlook for Melbourne’s market 

With two months of data under our belts, the direction of Melbourne’s property market this 2022 has become clearer for some market observers. 

CoreLogic’s report highlighted that the factors that drove the city’s solid growth in 2021 had lost their potency to drive housing values higher. These factors included record-low interest rates, rising household savings through lockdowns, an imbalance in supply and demand, government stimulus and strong consumer sentiment towards housing. 

With the threat of interest rate rises looming, price rise fatigue, the balance of supply and demand shifting in favour of buyers, and sentiment on the decline, the period of peak selling conditions may be a thing of the past for Melbourne. 

The Westpac-Melbourne Institute Index of Consumer Sentiment for February showed that the time to buy a dwelling index was 35.7 percent below the high point recorded in November 2020, reflecting a mix of affordability challenges and rising mortgage rates. 

Speaking on the figures, Westpac senior economist Matthew Hassan said: “It turned down pretty sharply over the last year and albeit from quite a high starting point.”

He added: “It’s pointing to a downturn over the next six months or so.”

CoreLogic also acknowledged that consumer sentiment could be further negatively impacted by Russia’s invasion of Ukraine, as the rising political risks trigger a new wave of global uncertainty.

But while downside risks to housing are growing, there are some upsides that should help to insulate the market from a sudden downturn. 

Open borders – both domestically and internationally – are seen to underpin housing demand. While the return of overseas travel is not expected to boost home buying demand immediately, CoreLogic forecasts a stronger rental demand in key areas such as inner-city precincts popular with foreign visitors and students.

The rollout of vaccinations and significant easing in social distancing restrictions is also seen to boost foot traffic in cities like Sydney and Melbourne. 

A lift in long-term/permanent migration is also expected to provide a gradual boost to purchasing demand over time. Improving economic conditions and higher wages growth are also likely to drive housing demand, according to CoreLogic. 

If you’re a first-time buyer looking to enter the real estate market, make sure to also check out Smart Property Investment’s brand-new white paper, Why 2022 is the right year to invest for beginners.  

For more industry expert insights on the property market, check out our amazing podcasts. Also, make sure to check our News section for the latest property market reports, insights, news and useful tips and strategies for investors. 



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, February 2022
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