Melbourne’s property market is in trouble

CoreLogic’s research director, Tim Lawless, expects Melbourne’s housing market to be “significantly disrupted” from the six week lockdown:

Over the previous lockdown period, which was in place between late March and mid-May, housing market activity was significantly disrupted.

The previous lockdown period saw real estate agent activity across Victoria slump by almost 70% before gradually improving post-Easter, with a sharp rise in activity once lockdown policies were eased around mid-May.

The drop in real estate agent activity foreshadowed a sharp drop in new listing numbers across Melbourne. Between mid-March and early-May the number of new listings added to the Melbourne housing market more than halved, to be 34% lower compared wit the same time a year ago. As restrictions were eased and consumer sentiment recovered to more normal levels, new listing numbers increased and were tracking 18% higher than a year ago through the first week of July.

With advertised stock levels falling and a plunge in consumer sentiment, the lockdown period also saw sales activity drop to the lowest level since the early 1990’s (excluding the seasonally slow January months). CoreLogic’s estimate of home sales dropped by 8.1% in March before plunging by 38.1% in April. As restrictions eased and both sellers and buyers became more confident, the number of home sales has picked up over the past two months to be 59% higher than the April low.

Auction results provided a further signpost of the housing market’s performance through the lock-down period, with Melbourne clearance rates falling to just 20% in early April after consistently tracking around the mid-70% range prior to March 2020. The drop in clearance rates was influenced by a substantial number of withdrawn auctions, while the large proportion of successful auctions (around 80%) were actually sold before the auction was held signaling a lack of vendor confidence to test the market under the hammer. Since restrictions were lifted, clearance rates have returned to the early 60% range, and the proportion of withdrawn auctions and ‘sold priors’ have normalised.

Melbourne also saw home values starting to trend lower from April, recording a 2.3% drop in dwelling values over the June quarter, which has been the largest decline to-date across the capital cities through the COVID period.

Looking forward, the six-week lockdown period will result in renewed downwards pressure on Victoria’s economy, including a worsening in labour market conditions, especially in those industries such as food and accommodation services and the arts and recreation services, that have proven to be extremely sensitive to strict social distancing measures. Consumer sentiment readings, which are highly correlated with housing activity, have already been dragged lower due to the acceleration in Victoria’s virus curve, and will likely fall further as consumers react negatively to the economic and social implications of the lockdown along with increased uncertainty.

If the housing market’s performance through the previous lockdown is anything to go by, it’s highly likely that Melbourne property transaction activity will see a sharp drop over the next six weeks, with both a material decline in new listings as vendors lose confidence in testing the market, and a lower number of sales as buyers retreat to the sidelines…

The downturn in Melbourne home values has been mild to date, and dwelling values were continuing to fall after restrictions were lifted amidst rising market activity. A return to a shortage of advertised supply should help to insulate home values from material declines, as will persistently low interest rates, ongoing government stimulus and forbearance measures for distressed borrowers which will help to keep urgent sales off the market.

Once the restrictions are lifted in six weeks-time there is likely to be a level of pent-up demand which will see housing activity improve, as it did when previously when social distancing measures were relaxed or lifted.

I am more bearish on Melbourne property than Tim Lawless.

The second lockdown will shatter confidence in Melbourne and will likely cause many small businesses to shutter for good, raising unemployment.

Melbourne’s quarantine failure has also scuttled any reboot of international students and immigration, which will hit Melbourne property especially hard.

A re-run of the last bear market looks like a good bet.

Leith van Onselen


  1. Could the property bubble finally be popped by a couple of security guards getting a bit of action? A butterfly truly flaps its wings…

  2. On a dark Monash Freeway
    Icey wind everywhere
    Warm smell of vibrants
    Rising up through the air
    Up ahead in the distance
    I saw a roadblock light
    My head grew heavy and my sight grew dim
    I had to stop for the night
    There he stood in the doorway
    I heard the property bell
    And I was thinkin’ to myself
    ‘This could be heaven or this could be hell
    Then he lit up a doubie
    And Dan showed me the way
    There were voices down the towerblocks
    I thought I heard them say
    Welcome to the Hotel Melabornia
    Such a wasted place (such a wasted place)
    Such a wasted face
    Plenty of room at the Hotel Melabornia
    Any time of year (any time of year)
    So many vibrants here

  3. As leaked via a FoI last month,, the RBA already has plans to step in an limit falls. Their “Circuit Breaker” request to the media and real estate sites will censor any news or data of large price falls.

    • They can try and hide it for a while, the falls will get out and it’s not hard to do your own research At the micro level

    • truthisfashionable

      I’d love to understand the unintended consequences of saying that a market is performing so poorly we have had to stop it would have on all the irrational actors in the Aussie property market.

      Unless this is to be the catalyst for a debt jubilee. Market is gone, keep what you have with how much you have paid for already.

  4. Display NameMEMBER

    It is busted when it is busted. A 10-15% fall is NOT busted. Not even close.

    Sadly I see no alternative other than a real crash to get some sensible policies. And sensible house prices.Bring it on. I have hoarded pop corn not toilet paper.

    • But I thought the debt was held by high income types who could most afford it? He’s FOS SloMo isn’t he.

  5. Professor DemographyMEMBER

    Not being able to drum up excitement at auctions removes some of the opportunities for people to get out before the big actual economic smash that is being prepared underneath that will start to hit later. While it is trivial that auctions cannot continue because it is just a manifestation of the pragmatics of holding an auction and in a strong market it would simply allow pent up demand to build up, in this scenario it is removing the last hurrah trade show party release.

  6. So is coal:

    Australia’s second-largest superannuation fund

    dumps coal

    Adani power plant and coal plans threatened

    The company did not answer what it would be relative to prevailing Indian prices.

    Why have you stopped doing Adani?

    • truthisfashionable

      The money quote:
      ““Since getting the money and going down countless avenues to sort out finance, we have found that no financial institutions want to touch us because of ‘financial hardship’,” Matt said. ”

      Edit: It genuinely made my LOL.

      • There was a number of quotes in that article that made me LOL… I particularly like the dislike of the ATO and the Governments negative gearing policies. 😀