Melbourne gets back to business following winter lockdown

A month ago, it was announced that Melbourne would transition out of its winter-cum-spring lockdown. Victoria had led the country’s second wave of coronavirus cases and deaths, leading to strong measures being implemented and fierce debate surrounding their merits.

As was reported at the time, Melbourne’s lockdown was going to impact activity in the property market. We know from ABS data that sales activity had taken already taken a hit in Q2 (see chart below). We’ll know how much further that dropped in Q3 in a few weeks. What we already know, however, is how the weekly auction figures were impacted.

Last weekend, Domain reported an auction clearance rate of 74 percent in Melbourne, with a total of 532 auctions taking place. This is a welcome change from two months earlier when no auctions took place. Recent auction data is promising for the Melbourne market, particularly in the face of bear market commentary during the lockdown.

Most importantly for Melbourne property investors and homeowners is the price of homes. The median price of homes sold at auction last weekend was $990,000—32 percent higher than it was in July prior to the lockdown. The CoreLogic Home Value Index shows that Melbourne property prices weren’t heavily affected by the lockdown, reaching a mild trough in October but since returning to the approximate level it was 12 months ago. In other words, a Melbourne home is worth about the same it was in November 2019 on average.

As far as rental vacancy rates go, now is not a great time to be looking for a tenant in the CBD. According to SQM Research, the CBD postcode (3000) rental vacancy rate reached 10.6 percent in October. Across the greater city, however, the rental vacancy rate is a more modest 4.4 percent. Rental market performance across Melbourne is very diverse, with the Mornington Peninsula seeing vacancy rates decline from 1.5 percent to 0.7 percent over the year to date. South East Melbourne has also performed contrary to expectations, with a vacancy rate of 1.3 percent indicating significant undersupply.

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