City Beat: Melbourne unit market insights for March

The Melbourne unit market saw positive growth over March, as both city-wide and national values look to have bottomed.

Values of units, which incorporates both apartments and townhouses, rose by 0.4 per cent across the capital, according to the latest CoreLogic Home Value Index (HVI).

It followed a pattern of softening declines. January saw values contract -1.1 per cent, before a much stronger February of just -0.2 per cent. 

Values are now just -0.9 per cent down year to date, and -5.5 per cent annually, considerably better off than the housing market over the last 12 months which declined -10.5 per cent. The Melbourne housing market is too on the recovery, posting 0.6 per cent gains over March.

Projects by Buxton Director Heath Thompson says the March quarter stats are good news, and appear to be showing that the market has either bottomed out or is very close to it.

"There is no doubt that the prices have been protected by record low stock levels but, the lack of new property in the pipeline suggests that rents will continue to increase and demand will be boosted as immigration continues to build and prices of new property will have to increase to support constructions costs," Thompson says.

"The alternative is that new property is simply not delivered which will further inflate the value of the property that exists as the supply and demand balance tips."

Scott Jessop, Sales and Marketing Director Sunkin, who are preparing to launch their 1000-dwelling masterplan in Highett, says the market is boiling up to be a perfect storm.

"When you mix the supply issues with the plight in the construction industry, and the forecasted growth in the immigration, there’s simply not enough housing," Jessop says.

"We’re still around three to four years behind getting back to a sustainable amount of properties being delivered every year. 

"VIC has probably been one of the most undersupplied states in the whole country since 2017 when the Labor Government made the stamp duty changes and foreign tax policies. They didn’t listen to every expert, forecaster, developer, and now we have a chronic shortage in housing. If the RBA pause rates then look out.

"I’m very bullish about the Melbourne property market as a whole.”

CoreLogic's HVI showed that Melbourne dwelling values (which incorporates both houses and units), are the closest to pre-COVID levels compared to all of the other capital cities.

Across the country, values were up 0.6 per cent in March, the first rise since April 2022.

Dwelling values were higher across the four largest capital cities and most of the broad ‘rest-of-state’ regions, led by a 1.4 per cent gain in Sydney.

CoreLogic’s Research Director, Tim Lawless, put the rise down to a combination of low advertised stock levels, extremely tight rental conditions and additional demand from overseas migration.

“Although interest rates are high and there is an expectation the economy will slow through the year, it’s clear other factors are now placing upwards pressure on home prices,” Lawless said.

“Advertised supply has been below average since September last year, with capital city listing numbers ending March almost -20% below the previous five-year average. Purchasing activity has also fallen but not as much as available supply; capital city sales activity was estimated to be roughly -7% below the previous five-year average through the March quarter.

“With rental markets this tight, it’s likely we are seeing some spillover from renting into purchasing, although, with mortgage rates so high, not everyone who wants to buy will be able to qualify for a loan. Similarly, with net overseas migration at record levels and rising, there is a chance more permanent or long-term migrants who can afford to, will skip the rental phase and fast track a home purchase simply because they can’t find rental accommodation.”

Read more: City Beat: Melbourne unit market insights for February