With prices plummeting and preliminary auctions clearing at over 80%, is Melbourne sellers' market? We take a look at why this is happening and why inner-city suburbs are the worst affected by falling values. You'll be surprised at how fast homes are flying off the market and why the best time to sell a house in Melbourne is now. Here are some reasons why:
Melbourne's housing market is a sellers' market
Home values in Melbourne fell in May, with a modest correction from their January apogee. While dwelling prices are still $84,000 higher than a year ago, they are down nearly $7,500 per month. Despite this, economists say the housing market in Melbourne will continue to slow. This is despite a new federal Labor government introducing policies to assist low and middle-income earners in buying a home.
Despite the sluggish housing market, there is still some good news. Rental yields in Melbourne and Sydney are improving. Both cities' rental yields climbed from record lows in December but still remain low. If prices continue to fall, and rents continue to rise, the housing market in Melbourne may recover quickly. While the market is still a sellers' market, it's a buyers' market in some areas.
In addition to a strong economy, the multicultural hub has encouraged multiculturalism in the city, which has been reflected in the restaurant scene. While the price gap between apartments and houses in Melbourne has widened, it remains the largest in the world. As a result, affordability constraints are likely to keep buyers looking for cheaper homes. The city has more millennials than any other city in the world.
Preliminary auction clearance rates are around 80%
The latest preliminary auction results show a solid rebound in activity across Australia. There were 630 auctions in Melbourne last week, up 22.3% from the previous week. Clearance rates were 74.6% nationally. The Outer East sub-region had the highest preliminary auction clearance rate of 89.1%, followed by the Mornington Peninsula with 60.6%. But it doesn't look like auction activity in Melbourne is about to drop off.
Overall, auction clearance rates in Melbourne were up slightly from the previous weekend. The rate for houses and units was around 62.5%, which was up from 46.8% in recent weeks. However, there are only 550 properties scheduled for auction this weekend. While discretionary sellers have opted to keep their properties off the market, there are still buyers out there despite high interest rates. Domain Group reported that the preliminary clearance rate for the four56 auctions it reported last week was around 80%.
This week's final and preliminary auction clearance rates are similar to last week, with an increase of nearly 40 per cent. Sydney auction activity rose 42.7% from the same period last year. Clearance rates in Melbourne were 70.3% this week, down from last week's preliminary clearance rate of 74.7%. The preliminary clearance rate for this week was slightly higher than the same period last year. The clearance rate in Sydney is still lower than last week, when it reached over 70 per cent.
Inner-city suburbs are seeing values fall
House prices in some inner-city suburbs of Melbourne have fallen by up to six per cent in the March quarter. This comes after nearly two years of the COVID-19 property boom. However, the downward trend has not yet reached the outer suburbs. In fact, it is expected to continue for another 12 months. The Reserve Bank of Australia raised interest rates by 0.5 percentage points on Tuesday, putting more pressure on home buyers.
Across the city, unit prices fell by up to 2.2 per cent, while in inner-city suburbs like Toorak, Box Hill, and Glen Waverley, prices dropped by up to 13 per cent. Conversely, property values rose in Fitzroy North, which offered a cheaper entry into the sought-after suburbs. According to Powell, the current market will allow more buyers to take advantage of lower prices.
Although Melbourne is leading the nation's trend of falling home values, there are still pockets of growth. In the Mornington Peninsula, bonbeach, a suburb 31km south-east of the CBD, saw a 42% rise in its house prices in the past year. Lancefield, an outer-suburb located in the Macedon Ranges, registered a 39% rise in house prices. Meanwhile, the biggest falls in house prices have been seen in the blue-chip suburbs, where prices rose a decade ago.