Melbourne property market on the road to a fast recovery

There “won’t be a Christmas period off” for real estate agents as prices and property listings rise.

Melbourne property prices are rising again, and experts on the ground say it’s just the beginning.

Throughout much of 2020, property prices in Victoria have struggled even as property markets in the rest of the country have started to recover from the effects of COVID-19 early in the year. This is unsurprising. Melbourne, Australia’s second largest property market, has endured a much stricter lockdown for much longer than anywhere else in the country.

But now that lockdown restrictions have eased in Melbourne the city’s property market is bouncing back fast.

CoreLogic’s November Home Value Index, the most recent price data available, shows a month-on-month rise of 0.7% in Melbourne. This is the first monthly rise since prices began to fall earlier in the year.

CoreLogic head of research Tim Lawless noted that the national price recovery is well underway but “The recovery in Melbourne, where home values remain 5% below their recent peak, will take longer.”

Property watchers on the ground expect the recovery sooner rather than later. “I am confident that the reported growth we’re seeing in the media is only the tip of the iceberg,” Melbourne buyer’s agent Cate Bakos told Finder.

“Since the start of November, competition has been tough, days on market have been tight and demand has well-exceeded supply.”

Patrick Jamroz, a real estate agent in Melbourne’s inner west, says the last month has been incredibly busy and it’s going to get busier. He has a large number of sellers preparing to put homes up for auction in the coming weeks.

“We’ll be launching a lot of properties in late December, early January. I don’t think we’re going to have a Christmas period off this year.”

It is still early days, for both Australia’s broader post-COVID recovery and for Melbourne property. But 2021 could be a strong year for real estate price growth in Melbourne.

Melbourne-based property expert Michael Yardney told Finder that “everything points to rising property values in 2021 as Melbourne enters a new property cycle”.

The concept of a property cycle refers to the idea that markets see periods of strong growth, followed by a period of stabilisation or even price falls, before a new rise begins.

But Yardney noted that the Melbourne property market contains different sectors based on location, price and quality.

“There is currently a flight to quality, but this is common at the early stage of the new property cycle, meaning A grade homes and investment grade properties are likely to outperform rising by close to 10% over the year 2021.”

Yardney predicts that properties in the “B grade” of less sought after properties and locations “will probably only increase in value by 4-5% over the next year.”

With low home loan rates and stamp duty in Victoria now heavily discounted, the current market looks like a rare opportunity for first home buyers.

“The majority of buyers are young families or young couples looking to start a family. Predominantly first home buyers,” Jamroz told Finder. “And a lot of people selling in the inner west are moving to the country.”

“With the people we see coming through looking at properties under a million, it’s only the first home buyers who are bringing [the stamp duty discounts] up. It’s like they’re finally in with a shot.”

But rapid price growth could turn Melbourne into a seller’s market fast. Buyer’s agent Cate Bakos thinks the market recovery could be “too positive”.

With stamp duty discounts for Victorians purchasing homes valued at under $1 million, it’s possible that “prices will zoom past our most vulnerable” in the most affordable section of the market, Bakos said. In effect, sellers can factor these discounts into pricing and affordability will quickly worsen.

“I believe that the winners will be the vendors.”