House prices in Melbourne and Sydney have been impacted as the effect of COVID-19 on immigration and domestic demand continues to weigh on major capital city real-estate markets.
Releasing its latest Home Value Index report, real-estate information services firm CoreLogic said overall dwelling prices fell by 0.4 percent during August and have declined by 1.7 percent over the past three months.
Leading the decline is Melbourne, which has been most impacted by the pandemic and which has seen dwelling values fall by 1.2 percent during the month and 3.5 percent over the quarter.
Perhaps surprisingly, detached house prices in Melbourne have been more impacted compared with multi-unit prices.
Overall, detached house prices in Melbourne have fallen by 1.4 percent during August and by 4.0 percent over the past three months.
Unit and apartment prices, by contrast, have declined by only 0.8 percent during August and 2.2 percent during the past three months.
This is despite the inner-urban concentrated multi-unit market in Melbourne being seen as the most vulnerable due to its exposure to physical distancing measures, slower immigration, the heavily impacted student occupier market segment and the effect of COVID on CBDs in general along with the need to absorb a massive volume of new stock following record levels of development activity in recent years.
Indeed, challenges within the multi-unit sector can be seen through the rental market, where the average rental price of multi-unit markets throughout Melbourne has dropped by 4.4 percent since March 31.
As well, listings of rental properties on sites such as realestate.com have surged in multi-unit inner city markets since March.
By comparison, rents for detached homes in Melbourne have fallen by only 1.0 percent over the same period.
Outside Melbourne, dwelling values in Sydney contracted by 0.5 percent during August and are down by 1.6 percent year on year.
As with Melbourne, Sydney prices have been more heavily impacted in detached housing (down 2.4 percent during the quarter) compared with multi-units (down 1.6 percent).
Also along with Melbourne, however, rents in the Sydney units and apartments have been more heavily impacted by the coronavirus compared with those in detached housing.
Since March 31, rents in multi-unit dwellings throughout Sydney have dropped by 4.2 percent.
Over the same period, those for detached houses fell by only 1.3 percent.
Markets in other capitals and in regional markets are broadly stable.
CoreLogic head of research Tim Lawless said markets are being impacted by COVID.
“The performance of housing markets are intrinsically linked with the extent of social distancing policies and border closures which also have a direct effect on labour market conditions and sentiment,” Lawless said.
“It’s not surprising to see Melbourne as the weakest housing market considering the extent of the virus outbreak, and subsequent restrictions, which have weakened the economic performance of Victoria.
“Looking forward we are likely to see a diverse outcome for housing markets around Australia, depending on how well the virus is contained and the regions exposure to other factors such as its reliance on overseas migration as a source of housing demand.”