Melbourne apartment market insights: What happened over April
Melbourne's unit market has continued to hold firm despite a cooling off in the house market.
CoreLogic’s national Home Value Index pegged the Melbourne-wide apartment growth at 0.4% over April, the third consecutive month growth in the unit market has outstripped growth in the house market.
The Melbourne unit market (which incorporates both units and townhouses), is now 0.2% since the start of 2022, after posting 0.2% growth across March and 0.1% in Feb. Values started the year poorly, going backwards -0.4% in January.
The median apartment value in Melbourne is now $630,671.
The growth in unit values is a stark contrast to the house market, which is sliding due to the affordability factors brought to more of a head following the RBA's interest rate hike in May, and expectation of further rate hikes.
Houses Melbourne-wide, on average, have remained flat since the start of 2022, but that was mainly due to a strong start in January. The rolling quarterly growth is now -0.5% after a 0.2% decline across April, CoreLogic data found.
CoreLogic’s Research Director Tim Lawless says the weakening state of the market has taken the rolling quarterly trend into negative territory across Melbourne for the first time since these cities were in the midst of extended lockdowns in mid-to-late 2020.
Advertised inventory, at a national level, is tracking almost 30 per cent below the previous five-year average however, in weaker markets like Melbourne, advertised supply levels have normalised, with listings in Melbourne 8.2% higher.
Higher stock levels across these markets can be explained by an above average flow of new listings coming on the market in combination with a drop in buyer demand
“With higher inventory levels and less competition, buyers are gradually moving back into the driver’s seat. That means more time to deliberate on their purchase decisions and negotiate on price,” Lawless says.
Rental markets are also showing multi-speed conditions, with most of the capital cities experiencing an upward trend in rental growth in 2022. Nationally, rents were up 2.7% over the three months to April, taking the annual change in national rents to 9.0%. A year ago, the annual change in national rents was 4.9 per cent. Based on the annual change, house rents (+9.1 per cent) are rising faster than unit rents (+8.7 per cent), however this trend is changing sharply as demand for unit rentals increases.
“On a rolling quarterly basis, we are now seeing unit rents rising faster than house rents especially in Melbourne where rental conditions across the unit sector were previously much softer,” Lawless says.
“The shift in rental demand towards units reflects both rental affordability pressures, which are deflecting more demand towards the ‘cheaper’ unit sector, and the return of overseas migrants and visitors. Rental demand from overseas arrivals tends to skew towards inner city and higher density precincts.”
In Melbourne, unit rents are 3.6 per cent higher over the past three months compared with a 1.2 per cent rise in house rents. Higher yields and long-term prospects for capital growth could see investors comprising a larger portion of housing market activity.
With the cash rate set to move through a rapid tightening cycle, CoreLogic expect this trend towards a gradual softening in the growth rate will become more pronounced over the coming months, before the national index starts to trend lower.
“Although we are expecting the housing market to move into a downturn through the second half of the year, it is important to remember the context of the recent growth phase,” he says.
