Welcome to our comprehensive update on the Melbourne residential property market for May 2023. As real estate experts, we’re here to provide you with the latest insights, sourced from Australia’s premier real estate data provider, CoreLogic. Let’s dive into the details.
Melbourne Housing Market Update: A Turnaround in Sight
Melbourne’s housing market has shown signs of stabilization in recent months. According to CoreLogic’s data, housing values in Melbourne posted a second consecutive month of growth in April. Although the lift was a modest 0.1 percent over the month, this trend indicates a stabilization in values following a significant downturn.
From their peak in March 2022, housing values in Melbourne fell by approximately $79,000. This downturn lasted until March 2023, marking a full year of declining values. However, the recent data suggests that we’ve now reached a trough, and the market is beginning to recover.
The Downturn and Recovery
The downturn in Melbourne’s housing market was a reflection of a broader national trend. Across Australia, housing markets experienced a slowdown, with values falling in many major cities. In Melbourne, the downturn was particularly pronounced, with housing values falling by nearly $79,000 from their peak in March 2022 to their lowest point in March 2023.
However, the latest data from CoreLogic suggests that this downturn has bottomed out. In April 2023, housing values in Melbourne posted a modest increase of 0.1 percent, marking the second consecutive month of growth. While this growth rate is modest, it is a positive sign that the market is stabilizing.
The Role of Economic Factors
Several economic factors have contributed to this stabilization. Firstly, interest rates have remained stable, which has helped to support housing affordability. Secondly, employment levels in Melbourne have remained strong, which has helped to support demand for housing. Finally, population growth in Melbourne has continued to outpace housing supply, which has put upward pressure on housing values.
Supply and Demand Dynamics: A Seller’s Market
Advertised supply levels in Melbourne have been tracking nearly seven percent below the previous five-year average through April. This lower supply level provides vendors with relatively strong selling conditions, as buyers have fewer options to choose from.
The Impact of Low Supply
Low supply levels in the housing market can have a significant impact on market dynamics. When there are fewer properties available for sale, competition among buyers can increase. This can lead to higher selling prices and shorter selling times.
In April 2023, the median number of days it took to sell a property in Melbourne reduced back to 30 days, down from 42 days in February. This decrease indicates that properties are moving more quickly, a positive sign for sellers.
The Role of Economic Factors
Several economic factors have contributed to the low supply levels in Melbourne’s housing market. Firstly, the strong employment levels in Melbourne have helped to support demand for housing. This has put upward pressure on housing values, making it a good time for homeowners to sell.
Secondly, population growth in Melbourne has continued to outpace housing supply. This has created a situation where there are more buyers than there are properties available for sale, which has helped to support housing values.
Auction Performance: A Sign of Market Health
Auction clearance rates are another key indicator of market health. In Melbourne, these rates ended the month at 71.8 percent, a few percentage points above the long-run average. This above-average performance suggests that buyers are active and competition for properties is healthy.
Understanding Auction Clearance Rates
Auction clearance rates are a measure of the percentage of properties sold at auction. A high auction clearance rate indicates a strong demand for properties, while a lowauction clearance rate can suggest a softer market. In Melbourne, the auction clearance rate for April 2023 was 71.8 percent, which is above the long-run average. This suggests that the market is healthy, with strong demand for properties.
The Role of Auctions in the Melbourne Market
Auctions play a significant role in the Melbourne property market. They are a popular method of sale, particularly for properties in high-demand areas. A high auction clearance rate can be a sign of strong competition among buyers, which can help to drive up property prices.
In April 2023, the strong auction clearance rate in Melbourne suggests that buyers were active and competition for properties was healthy. This is a positive sign for sellers, as it suggests that there is strong demand for their properties.
The Future Outlook: Challenges and Opportunities
While the bottom of the downturn appears to be behind us, we aren’t expecting housing values to rise materially until certain conditions are met. These include a reduction in interest rates, an easing of credit policies, or the introduction of housing-focused stimulus.
The Role of Interest Rates
Interest rates play a crucial role in the housing market. When interest rates are low, borrowing costs are reduced, making it more affordable for people to buy homes. This can help to drive up demand for properties, leading to increases in property values.
However, if interest rates are high, borrowing costs can be prohibitive, which can dampen demand for properties. This can put downward pressure on property values.
In the current market, interest rates have remained stable, which has helped to support housing affordability. However, for housing values to rise materially, we may need to see a reduction in interest rates.
The Impact of Credit Policies
Credit policies also play a crucial role in the housing market. When credit policies are loose, it is easier for people to borrow money to buy homes. This can help to drive up demand for properties, leading to increases in property values.
However, if credit policies are tight, it can be harder for people to borrow money. This can dampen demand for properties, putting downward pressure on property values.
In the current market, credit policies have remained stable. However, for housing values to rise materially, we may need to see an easing of credit policies.
The Potential for Housing-Focused Stimulus
Housing-focused stimulus measures, such as grants for first-time homebuyers or incentives for property investors, can also help to boost demand for properties. This can lead to increases in property values.
In the current market, there are no significant housing-focused stimulus measures in place. However, the introduction of such measures could potentially help to boost housing values.
Conclusion
The Melbourne residential property market has shown resilience in the face of a challenging year. While we’ve seen a significant downturn, recent trends suggest that we’re now moving towards stabilization and recovery.
As real estate experts, we’ll continue to monitor these trends closely and provide you with the latest insights. Remember, every property market has its ups and downs, and understanding these cycles is key to making informed decisions.
Stay tuned for our next update, and in the meantime, don’t hesitate to reach out if you have any questions about the Melbourne property market.
Data sourced from CoreLogic, Australia’s premier real estate data provider.
