High cost of living and high interest rates have kept consumer confidence down since mid-2022 with the effect starting to come through in housing values across Melbourne.
The CoreLogic Hedonic Home Value Index released on February 1, 2024 reveals the average house price in Melbourne has dropped by 0.1 per cent for January.
This follows a decline of 0.02 per cent during the three months leading into December 2023 as reported in CoreLogic’s Monthly Housing Chart Pack released in January 2024.
However, these declines follow an overall increase of 3.5 per cent for 2023 with the city’s value now sitting 4.1 per cent below the record high in March 2022.
This decline has stripped Melbourne of its position as third most expensive capital city in Australia with Brisbane now holding that position but only by a few thousand.
The median house price in Melbourne was listed at $780,457 in Core Logic’s Property Pulse report while Brisbane sits, just ahead, at $787,217.
Sydney and Canberra still hold the top two positions at $843,171 and $1,128,322 respectively.
The amount of homes sold across Melbourne has also dropped from previous years with sales volumes down 4.2 per cent compared to the previous 12 months.
The lower number of homes on offer has kept the amount of time it takes to sell down with the median days on market for Melbourne at 30 days which is the same as the national average.
The change between 2023 and 2022 is just one day with the December quarter average 30 days for 2023 and 29 days for 2022.
A lift in consumer confidence should be positive for the housing market and a rise in confidence is expected according to CoreLogic Hedonic Home Value Index with inflation easing and the prospect of rate cuts later this year.
The report revealed inflation fell to 4.1 per cent in December 2023 following the peak at the end of 2022 at 7.8 per cent.
“The expectation is that CPI will continue to trend lower, potentially beating the RBA forecast of 4 per cent annual headline CPI by the middle of 2024,” the report stated.
“Lower inflation should help to bring the cash rate down, but also provide some support for consumer sentiment as cost of living pressures subside.”
Melbourne is also leading other capital cities in annual change to rental rates for houses with an increase of 11.1 per cent for 2023.
This is above the national annual increase of 8.3 per cent and above the combined capitals annual increase of 9.8 per cent.
For gross rental yields for December 2023 the city was tracking in line with the combined capitals at 3.5 per cent. The overall increase was due to a slowdown in the pace of capital gains against a slight uptick in rent value increases through the December quarter according to the Monthly Housing Chart Pack released in January 2024.
The median weekly rent in Melbourne was sitting at $565 as reported in the Rental Market Update released on Tuesday 23, January 2024 by CoreLogic.
The same report revealed a steady increase for Melbourne rents with a monthly increase of 0.5 per cent, quarterly change of 1.5 per cent and annual change at 11.1 per cent.
The rental changes for units tells a different story for Melbourne. For previous months units have recorded strong numbers compared to house rents but the past three months have seen that flip.
“The slowdown in unit rental growth coincides with what has likely been a peak in net overseas migration around the middle of last year,” CoreLogic’s research director Tim Lawless said.
“This has been particularly noticeable in Sydney and Melbourne, the two cities attracting the largest share of net overseas migration.
“With migration expected to ease from record highs last year, we could see a further moderation in the upwards pressure on unit rents.”