Melbourne house and apartment prices have been falling harder and faster than anywhere else in Australia except regional WA since COVID-19-related restrictions on movement and trading first began, according to CoreLogic.
Dwelling values in Australia's second-largest city and housing market fell by 1.2% over August, more than double the fall of the next weakest capital for the month, Sydney (down 0.5%).
The relative underperformance of the two major markets dragged down the national monthly average of the combined capital cities by 0.5%, despite values being flat or even improving across all other capitals in August.
CoreLogic's numbers were released on the same day the Reserve Bank of Australia held the cash rate at 0.25%. It has remained unchanged since 20 March.
Melbourne is currently in the midst of the toughest lockdown of all Australian cities and regions.
"Through the COVID period to date, Melbourne home values have fallen by 4.6%," said Tim Lawless, CoreLogic's head of research. This compares with a 2.5% fall across the combined capitals.
"The performance of housing markets is intrinsically linked with the extent of social distancing policies and border closures, which also have a direct effect on labour market conditions and sentiment," he 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.”
Lawless also argued that Sydney and Melbourne are more vulnerable to "a larger demand-side impact from stalled overseas migration" than any other market in Australia, given both cities combined account for about 85% of all net overseas migration. He said that by contrast, "unlike their capital city counterparts... most regional markets have avoided the drop in demand caused by the pause in migration".
Lawless also suggested regional markets may become increasingly appealing as "the normalisation of remote work through the pandemic could make proximity to major cities less of a factor in home purchasing decisions".
Property prices in regional NSW have gone up 1.2% over the past three months, according to CoreLogic numbers, though they've fallen by around the same amount in regional Victoria.
But despite the relatively difficult conditions being experienced by the Melbourne and (to a lesser extent) Sydney markets, CommBank Senior Economist Belinda Allen sounded a cautiously upbeat tone. "In the context of an extraordinary negative economic shock, the fall in national dwelling prices has so far been modest. That outcome has surprised us," she said.
Allen also noted that the rate at which dwelling prices are falling slowed to 0.5% in August from 0.8% in July and June.
Perth has now fallen behind Adelaide to become the second-most affordable capital city for real estate, with a median dwelling price of $443,777 (just behind Adelaide's $444,021). With a median of $393,386, Darwin remains by far the most affordable capital.