Melbourne house values to recover 7.3% in two years: Moody's Analytics

Melbourne house prices are expected to significantly outperform units in the medium to long term, according to Moody's Analytics.

They forecast the Greater Melbourne area's house values to increase by a 1.3% in 2020 and make a large recovery of 6% in 2021, after a -10.8% decline in 2019. 

Moody's said the fall in values has been most pronounced in Melbourne’s inner suburbs, where house values have fallen as much as 21% from their peak

The decline of unit values across Greater Melbourne has been less pronounced than for detached houses.

Similar to the detached house market, however, unit values have also displayed tentative signs of improvement.

House values in Melbourne-Inner East have edged up since April, while the pace of declines has slowed noticeably in Melbourne-Inner South and Melbourne-South East.

"Notably, dwelling fixed investment declined for the second straight quarter, with the fall in residential building approvals suggesting further weakness ahead," the report said.

"Indeed, housing finance commitments in Victoria, including those for construction of new dwellings continue to fall from year-ago levels.

"In 2019 Melbourne Inner East, Inner South and Outer East are expected to experience the largest declines, with home values forecast to fall by 13.9%, 14.9% and 12.7%, respectively."

By early 2020, house values across most of Greater Melbourne are forecast to experience a return to month-on-month growth.

Overall, Greater Melbourne house values are expected to tick up 1.3% in 2020, with Melbourne-Inner East and Melbourne-North East leading the recovery.