Sentiment sags in Melbourne

Victoria’s return to lockdown in early July has raised more questions about its real estate markets. Tim Lawless, research director for Asia Pacific at CoreLogic, says the implication was that the renewed measures included a ban on on-site auctions and open home inspections.

“Over the previous lockdown period, which was in place between late March and mid-May, housing market activity was significantly disrupted,” he says. “The previous lockdown period saw real estate agent activity across Victoria slump by almost 70% before gradually improving postEaster, with a sharp rise in activity once lockdown policies were eased around mid-May.”

Home values in Melbourne started to trend lower in April, recording a 2.3% drop during the June quarter. This was the largest decline to date across the capital cities through the Covid-19 period, says Lawless. Consumer sentiment, which is highly correlated with housing activity, was already lower in July 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”.

Lawless says the Melbourne downturn has been mild to date, and values continued to fall after restrictions were first lifted amid 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,” he says.

“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 previously when social distancing measures were relaxed or lifted.”