Rebecca DiNuzzo

1 Sep 2021

Melbourne’s booming property market is continuing to lose steam, with the city recording its lowest monthly price rise since January.

CoreLogic’s latest Hedonic Home Values Index shows the city’s combined house and unit values grew 1.2 per cent in August – down slightly from 1.3 per cent in July, in good news for budding buyers battling “worsening affordability”.

House prices increased 1.4 per cent to reach a $954,496 median, while the typical unit also recorded a slight rise of 0.5 per cent to $615,909.

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CoreLogic research director Tim Lawless said the August report provided further confirmation the rate of price growth was moderating in Melbourne after the market peaked in March.

“The previous rapid rise in housing values wasn’t sustainable, so this is something that’s very organic,” Mr Lawless said.

He said the slowing rate of growth was likely due to “worsening affordability constraints” rather than ongoing lockdowns, as property values were rising dramatically more than wages.

“In two months, we are seeing the cost of a home rising more than the average wage over a year,” Mr Lawless added.

“There’s even an argument that lockdowns have been supportive of price growth because we see that dive of listing numbers (which drives demand), and listing numbers in Melbourne are down 17 per cent compared to last year.”

SQM Research figures also show Melbourne total listings had dropped 13.1 per cent in the last month alone.

But pent-up supply would likely hit the market for a busy “delayed spring” selling period once the city emerged from lockdown again.

Australian housing values had also jumped 1.5 per cent across August – a rate of growth that was still “well above average”, which wasn’t tipped to slow until there was a change to the current record-low interest rates, according to Mr Lawless.

“This is a very strong rate of growth and we haven’t seen haven’t seen national prices grow (like this) on an annual basis since 1989,” he noted.

“It highlights that the growth cycle isn’t unprecedented, but it is extremely rare … and it will continue to moderate but it probably won’t reverse until we see interest rates change, which we know won’t be for quite some time.”