House price falls accelerate in Melbourne as state faces COVID lockdowns

author-avatar By on July 01, 2020
House price falls accelerate in Melbourne as state faces COVID lockdowns

Photo by Cindy Tang on Unsplash

National property prices have fallen for the second month in a row, led by Perth and Melbourne, as the state of Victoria faces a second wave of infections.

CoreLogic's monthly home value index showed a 0.7% drop in property prices nationally, marking the second consecutive month of falls after a 0.4% drop in May.

The biggest price falls were in Perth and Melbourne, where values dropped by 1.1%, while values fell 0.8% in Sydney, 0.4% in Brisbane, and Adelaide slipped by 0.2%.

But prices in the smaller capital cities of Hobart, Darwin and Canberra defied the downturn and recorded modest growth of 0.3%, 0.3% and 0.1% respectively.

However, property prices in Melbourne are falling the fastest out of all the capital cities. Over the last three months, prices have plunged 2.3%. 

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers.

Provider
Ad rate
p.a.
Comp rate*
p.a.
Monthly
repayment
 
Budget Home Loan OO P&I
2.68% 2.74% $1,618 More details
2.89% 2.89% $1,663 More details
2.39% 2.40% $1,558 More details
Economy Variable P&I 70%
2.69% 2.86% $1,620 More details

Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Introductory rate products were not considered for selection. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term. Rates correct as at 08 July 2020. View disclaimer.

CoreLogic head of research Tim Lawless said this is mostly being driven by the upper end of the market where values have fallen 3.7%, but acknowledged that the recent spike of infections in Victoria is concerning.

"The recent rise of active virus cases in Victoria are a reminder that the potential risk of a second wave remains a stark reality. If we see the virus curve steepening rather than flattening, a return to restrictive policies is highly likely," he said.

In a major blow to the real estate industry, public auctions and open for inspections have again been scrapped in Melbourne's coronavirus hotspots. 

Real Estate Institute of Victoria (REIV) President Leah Calnan said the industry will have to revert back to inspections by appointment only and online auctions in Melbourne’s ten Covid-19 hotspots.

“Any return of restrictions is frustrating for all involved, but the real estate sector is prepared to do what’s required to help curb Covid-19,” Ms Calnan said.

Stage three government restrictions in the affected areas are expected to be in place until at least July 29. 

Teetering on the edge of a fiscal cliff

Mr Lawless said a variety of factors have helped to insulate property prices from more significant declines, including government stimulus measures and persistently low advertised stock levels. 

"Additionally, low interest rates and forbearance policies from lenders have helped to keep urgent sales off the market, providing further insulation to housing values."

But he warns that while the decline in prices nationally has been relatively mild since April, the longer term outlook remains uncertain.

“While it is encouraging to see lenders have recently hinted at an extension in their repayment leniency policies, the government stimulus will eventually taper and banks will require borrowers to repay their loans," Mr Lawless said.

"The longer term outlook for the housing market is largely dependent on how well the economy is tracking when these support measures are removed.

"Eventually the economy and borrowers will need to abide by market forces. This is when we could see a rise in mortgage arrears and the potential for a lift in urgent or forced sales."


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2019. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2019) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au and loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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author-avatar
Emma joined Savings.com.au as a Finance Journalist in 2019. She is a journalist with more than five years experience across print, broadcast and digital media, with previous stints at Style Magazines, 4ZZZ radio, and as editor of The Real Estate Conversation. She's most passionate about improving the financial literacy of young women and millennials by writing about complex financial topics in a way that's easy for the average Joe (or Jill) to understand. When she's not writing about finance she's watching Greys Anatomy (again).

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