Melbourne apartment insights: What happened to Melbourne apartment values in September?

Melbourne's apartment values continued to grow over September, posting 0.2 per cent gains according to the property data firm CoreLogic's monthly index.

It's another month of gains for Melbourne apartments, which haven't seen a decline in 2021 despite the continued shutdown of immigration due to border closures.

Across 2020 Melbourne apartment values were flat, and so far in 2021 they've grown 6.8 per cent, to a new median $619,000. The median at the start of the year was $576,000.

Housing affordability continues to worsen nationally, as houses in most of the major capitals outstripped the growth in the apartment market, the exceptions being Hobart and Darwin.

CoreLogic’s national home value index saw dwellings (houses and units combined) jump another 1.5 per cent in September, taking Australian housing values 17.6 per cent higher over the first nine months of the year and 20.3 per cent higher over the past 12 months. The annual growth rate is now tracking at the fastest pace since the year ending June 1989.

Despite the prolonged growth of dwelling prices, the growth has eased back slightly from the peak growth rate in March nationally dwelling values increased by 2.8 per cent.

CoreLogic’s research director, Tim Lawless, believes the slowing growth conditions are the result of higher barriers to entry for non- home owners along with fewer government incentives to enter the market.

“With housing values rising substantially faster than household incomes, raising a deposit has become more challenging for most cohorts of the market, especially first home buyers," Lawless said.

"Sydney is a prime example where the median house value is now just over $1.3 million. In order to raise a 20 per cent deposit, the typical Sydney house buyer would need around $262,300.

"Existing home owners looking to upgrade, downsize or move home may be less impacted as they have had the benefit of equity that has accrued as housing values surged.

The number of owner-occupier first home buyer loans has fallen by -20.5 per cent between January and July, as the impact of the tapering of government stimulus continues to show.

Lawless notes that over the same period, the number of first home buyers taking out an investment housing loan has increased, albeit from a low base, by 45 per cent.

"This suggests more first home buyers are choosing to ‘rent vest’ as a way of getting their foot in the door,” Lawless said.

The September quarter saw unit values rising faster than house values across regional Australia.

"This is probably a reflection of stronger demand for downsizing options and holiday homes in popular coastal markets,” Lawless suggested.

Investors are back looking at the local apartment market. Unit rents now rising faster than houses across Melbourne (1.3 per cent for units, 1.1 per cent for houses).

“This is a significant change in rental market trends, where previously the unit precincts, especially inner-city high-rise areas of Melbourne and Sydney, were acting as a drag on rental growth,” Lawless said.

Yields are low in the major capitals, however so are investor mortgage rates, Lawless notes. 

"In July, the average three-year fixed rate for a new investor loan was 2.38 per cent, while variable rates were averaging 3.01 per cent."

Lawless says the coming months are likely to see advertised stock levels move higher.

"The spring selling season has been delayed to some extent by lockdowns in Sydney, Melbourne and Canberra, however the recent trend has shifted towards a rising number of new listings.

"As demand becomes more constrained from worsening affordability and potentially tighter lending conditions, advertised stock levels may start to normalise over the final quarter of the year.

"This could take further heat out of the market as buyers benefit from more choice and less urgency."