Melbourne and VIC market update - June 2021

Where in recent months growth in Australia's property market has been relatively broad-based, June saw more of a spread between the highs and lows, and it's been a bit of a mixed bag for Victoria too. 

CoreLogic's latest report has nationwide growth at +1.9 per cent for the month, a figure that Melbourne fell below while regional Victoria edged just ahead of. 

The year-to-date growth for both markets is still looking strong, though, and now on the other side of another lockdown there's some breathing space for Victorian property to continue its upward journey. 

So where are the strengths and weaknesses in the market, and where does it look like things are heading for the state? 

Melbourne market update

Melbourne home prices got a +1.5 per cent bump in June, raising the median dwelling value to $753,100.

That equates to about a $12,500 increase for the month, or close to $2,900 a week. 

Houses had the lion's share of the growth, creeping towards the $1 million median mark and closing the quarter up +5.5 per cent, while units increased in value just +2.5 per cent over the same three-month period. 

To put things into perspective, the average monthly change in Australian home values over the past decade is +0.4 per cent, so while Melbourne's current property market performance might be weaker than some other capitals, there's no denying these are still unusually hot conditions. 

After a slower start to the month thanks to the city's lockdown extension, auction clearance rates tracked in the low-to-mid 70 per cents throughout June, a strong sign that demand remains high and conditions are still hot. 

That's backed up by the latest SQM Research listing numbers, which show total stock on the market dropping by -5.3 per cent since May.

Buyers outnumbering sellers is a real enduring trend throughout this boom. 

VIC regional market update

Capital city markets are outpacing their regional counterparts in every state except Victoria, where areas outside of Greater Melbourne continue to thrive. 

Regional Victoria as a whole got a +2.0 per cent boost in median dwelling prices over June, with units continuing to turn in slightly better results than houses. 

It closes a massive financial year for those outside the capitals, with values in regional Victoria growing by +15.9 per cent in 12 months. 

That equates to a $91,840 rise in the median property price in the space of just one year. 

CoreLogic's new Million Dollar Markets report, which highlights suburbs that broke through the $1 million median barrier in the 12 months to the close of May, found that regional Victoria nearly tripled the number of entrants to the list. 

Of the seven new million-dollar markets—all of them suburbs of Geelong—houses in Jan Juc saw the steepest rise, where prices rocketed up +38.4 per cent in the year to hit a mammoth $1.32 million median value. 

Melbourne and VIC rental market update

Victorian rentals have continued their struggle in June, in Melbourne especially. 

Gross rental yields are down to 2.8 per cent for the capital as property values rise at a faster pace than rents, and inner-city units remain the hardest hit. 

But "even the worst affected rental markets showed a more defined recovery trend through June," CoreLogic's Head of Research Australia Eliza Owen points out.

"In Melbourne, the annual change in unit rent values was -6.4 per cent, recovering slightly from year-on-year declines of -8.2% in the 12 months to March 2021," she explains. 

According to REIV's latest data, the weekly median rent for Melbourne houses went up from $475 in April to $490 in May, while the vacancy rate dropped from 6.5 to 6.3 per cent in that same period, a small but positive shift upwards. 

Rentals in regional Victoria are also doing it tough, with a 3.9 per cent gross rental yield making it the worst-performing of the regional markets. 

Vacancy rates remain far slimmer than metropolitan Melbourne, though—they're at just 1.1 per cent as of May. That same month, median weekly rent for houses went up by $10 to $400. 

What's next for the Melbourne and VIC markets? 

In recent weeks the Australian Covid script has been flipped, with Victoria continuing to open up further as other states introduce new snap lockdowns. 

With the state back open for business and auctions able to proceed freely, we're already seeing clearance rates bounce back up to very healthy levels.

CoreLogic cautions that there are some potential market headwinds on the way, though, not least that it's looking increasingly likely that the Reserve Bank of Australia will be raising interest rates sooner than their projected 2024 timeframe. 

Big banks and pundits alike are tipping that rise to come as early as next year and, as a result, mortgages are beginning to creep up in cost, a move that could take some heat out of the market. 

Issues around housing affordability may also have a cooling effect on things, CoreLogic says, as could any further lockdowns. 

For now, though, values continue to climb steadily, homes continue to be snapped up quickly, and conditions remain favourable for sellers.