House prices across Melbourne have risen at a remarkable rate since we emerged from our 100+ day lockdown last October. In the space of just 9 months, the Median $ House Price in Melbourne has jumped by about 15%.

If you’ve been in the market, inspecting properties and attending auctions you may have been struck by how intense competition has been. Why have so many buyers proven so committed?

A renewed sense of purpose following months of home confinement, record low interest rates, government incentives and brick-and-mortar certainty in times of volatility. But, that doesn’t fully explain the supply bottleneck that built up…

The graph below shows monthly residential sales volumes across Melbourne since April last year. And, it compares these actual sales volumes to expected sales volumes (based on historical averages).

COVID hit in March 2020, and sales volumes dropped considerably in April and May as Australians – and much of the world – sought shelter from what looked like a very scary emerging pandemic.

Things began to open up in June, and Melbourne buyers and sellers started transacting again. Then, harsh lockdowns were introduced in July, and sales volumes plummeted to a mere trickle in August and September.

From April to October 2020, residential sales volumes were down 34%. An estimated 16,000 fewer property transactions occurred than what would normally be expected. That is a remarkable number in terms of bottled up demand, particularly when you think about what we were collectively living through – how many families, for months on end, were stuck within houses that felt too small, outdated, or totally inadequate for 24/7 living?

When the market opened up properly in October, buyers emerged with serious intent. I remember attending many auctions where buyers seemed to bid as though no other property would ever come onto the market again. Reserves were smashed, and prices jumped accordingly.

Prospective sellers took notice. More properties came onto the market. The typical ‘Melbourne selling season’ thinking went out the window – why not list in January? Why not indeed. Nearly 50% more properties were sold in January this year than were sold in January 2020.

From November 2020 to May this year, sales volumes trebled. Over 40% more residential properties sold during this period than would be expected in normal times. That’s an estimated 20,000 more property transactions.

The market feels like it’s settled down a bit over the last month. One of the reasons for this apparent stabilisation: the feverish demand from buyers that built up over months has largely been satiated by increased supply. Preliminary numbers for June show sales volumes roughly in-line with normal times.