The Melbourne property market continues to power on through economic lockdowns, home curfews, travel restrictions and industry-wide shutdowns.

Seller ingenuity has been key to enabling transactions and keeping the industry running; virtual appraisals, inspections and auctions characterised much of the last few months, as have off-market and sight-unseen purchases. Price figures for August to September are a bit rubbery due to very low sales volumes, but preliminary results point to continued buoyancy in the market.

The rolling 12-month median house price across Melbourne had hit $1million in March and it hasn’t stopped rising since then, leaving prices up about 9% in the last 6 months alone. Increased stock has hit the market in recent weeks, and it feels like a bit of balance is returning between supply and demand. Some auctions continue to see 5+ bidders and new price records are regularly occurring, but more listings will naturally result in fewer buyers competing for individual properties.

APRA and other authorities are conscious of keeping a lid on things, and we’ll likely see more intervention than simply adding a further 0.5% interest rate buffer on loan serviceability calculations. While the two points mentioned may result in some of the heat coming out of the market, trends across other Australian capital cities suggest that there is still more price growth to come for Melbourne.

Nelson Alexander Head of Property Management, Martin Sizer, says the current letting environment faced by Rental Providers is a key reason why many are swinging back to large, full-service real estate agencies such as Nelson Alexander.

Across Melbourne’s North and Northeast, the current average weekly asking rent for a house has fallen by 3% compared to the months pre-COVID. Over the same time, asking rent for apartments have fallen by nearly 8%.

What explains these falls and where are they concentrated most? Lockdown measures in Melbourne have disproportionately affected workers in the retail and\ hospitality sectors. Many people within these industries have experienced unemployment or have seen their work hours and conditions reduce.

Retail and hospitality employees, together with the international post-secondary students that our postsecondary institutions have come to rely on, are more likely to rent than to own. They naturally choose to live close to their place of employment or their educational institution. Therefore, rental demand in areas near the CBD and prominent universities have decreased, leading to lower rental rates and associated rental yields.

As property sale values begin to rise, rental incomes have been falling. The result is a relative decrease in rental yields for investors. Your typical North/Northeast yield has fallen from 2.6% to 2.2% for houses, and from 3.7% to 3.1% for apartments.

This is a key reason why Rental Providers are moving their properties to Nelson Alexander, because of our strong sales team and our rental market experience.

There are many synergies between the sales and the rental industries in the current market, and full-service agencies are in the box seat to cater to the multi-faceted needs of people who own property.

If you would like to know more information on property management and our selling strategies, please contact any of our Nelson Alexander offices.