With many students losing incomes, and a wave of international students holding back in their home countries, a wave of apartments has been added to Melbourne’s vacancy rate and rental oversupply, according to Herron Todd White’s residential report for May.

Values across the capital in April recorded a dip of –0.3% in CoreLogic’s Home Value Index, and while prices look to further soften, director and senior buyer's agent at National Property Buyers, Antony Bucello, says, “The Melbourne property market is resilient and growth will return, and it may return in a rush.”

“In the longer-term reduced population growth and higher unemployment numbers may start to take effect on property values,” Bucello shares. “However, with government stimulus packages in place and confidence returning to the Australian people it is still unlikely the market will crash.”

The steam being taken out of the price race, coupled with record-low interest rates, could be a good time for those who hold the finance to “still find a quality property and secure it for a good price if you are patient and focused”, the director adds.

Construction boost needed

Meanwhile, the state needs an immediate construction boost to stimulate demand for new homes and to kickstart a quick recovery, according to the Housing Industry Association (HIA), with housing starts in Victoria are projected to be down by 12.7% this year. This decline is expected to extend into next year, with the state likely to report a further 33.8% drop in building commencements.

Fiona Nield, executive director for Victoria at HIA, says the COVID-19 restrictions have resulted in lower sales and high levels of cancellations, according to HIA. Given these factors, home-building activity is likely to contract over the second half of the year.

"This will see the market at a lower point in December 2020 than it was during the 1990s recession, so stimulating demand so that the existing housing workforce can be retained and can deliver the homes Victorians need this year has never been so important," she says.

Nield says the property market would benefit from a range of measures including the recently announced HomeBuilder stimulus for home buyers, which see builders of new homes get access to $25,000 in funding. It would also benefit from planning and building reforms, stamp-duty concessions and incentives for foreign investors, Neild says.

Weathering the storm

Leah Calnan, president of the Real Estate Institute of Victoria (REIV), says Victoria was well positioned to weather the impacts of the COVID-19 outbreak on the economy and the housing market.

“There are many predictions circling about real estate and the economy in general, but looking at what the actual data tells us, the Victorian market is weathering the storm well,” she says.

Calnan adds that house prices are not as affected as sales volume, which remains much lower than expected at this time of year.

“The Victorian market continues to show strong resilience, with the return of public auctions and easing of some restrictions, we expect the market to soon start gaining the momentum it lost due to the pandemic,” she says.

State Region Property Type Median Price Quarterly Growth 12 month Growth Weekly Median Advertised Rent Gross Rental Yield
VIC Metro Houses $727,000 1.4% 1.7% $430 3.1%
VIC Metro Units $575,000 1.8% 8.5% $430 3.9%
VIC Country Houses $388,000 1.3% 5.6% $350 4.8%
VIC Country Units $292,750 0.8% 9.3% $285 5.0%
Source: CoreLogic, June 2020