Article

Have Melbourne’s roaring twenties begun?

May 18, 2021 / By

While the rest of Australia began to re-open in mid-2020, Melbourne underwent an additional four months of lockdown until late October – one of the world’s strictest and longest continuous lockdowns as a result of COVID-19. Despite this setback, Melbourne has made an astounding recovery, with remarkably low community transmission recorded throughout 2021. Does this mark the beginning of a new period of growth and transformation for Melbourne?

The Victorian government has almost entirely removed venue capacity restrictions and social distancing requirements. On April 25th, Melbourne hosted the world’s largest sporting event by attendance since the pandemic has begun. The annual ANZAC Day AFL game attracted over 78,000 spectators, who were not required to wear masks.

Market indicators are increasingly reflecting the feeling of revitalisation and revival in Melbourne. The Westpac-Melbourne Institute of Consumer Sentiment highlighted a strong surge in Victorian consumer confidence recently, with the index growing 11.8% in April. Strong consumer confidence is being reflected in both the residential and retail markets. Melbourne dwelling prices[1] grew 5.8% over the three months to April 2021. Retail trade data[2] also shows spending has returned to pre-pandemic levels. As of February 2021, Victoria’s retail trade had grown 0.8% year-on-year (y-o-y).

The latest foot traffic data[3] also shows that CBD foot traffic has more than tripled since the low point recorded in August 2020. The rebound in foot traffic  is led by the ‘Paris-End’ of Collins Street, which includes Melbourne’s premier luxury shopping strip and premium office towers. As of March 2021, foot traffic in this precinct was 12% lower than pre-pandemic numbers, recorded in February 2020. Furthermore, foot traffic in the CBD retail core (Bourke Street Mall and Melbourne Central) has recently gained momentum, growing 53% in March alone.

However, Melbourne is still missing multiple drivers of CBD economic activity. This includes:

  • Students – Prior to COVID-19, international students were an important part of Melbourne’s Northern CBD atmosphere, where most student accommodation is located. ABS data shows international arrivals on student visas fell 68% in 2020.
  • Tourists – Australia’s international border has been closed since March 2020, with the government only recently allowing visitors from New Zealand. Victoria’s annual overnight tourist expenditure declined by AUD 10.0 billion or 59% in 2020[4].
  • Office workers – Despite the recent removal of workplace occupancy limits, Melbourne office worker occupancy is currently at 35%[5] of pre-COVID levels.

The absence of these groups is particularly weighing on the hospitality industry. Contrary to the general recovery in retail spending, cafes, restaurants and takeaway spending has fallen 32.2% year-on-year, equating to a loss of AUD 3.6 billion.

Prior to COVID-19, Victoria’s population growth was a key economic driver, averaging 2.3% per annum between 2015 and 2019, outpacing many major developed OECD economies. Will pre-pandemic pull factors (livability, education and healthcare) re-start Melbourne’s population growth once borders re-open?

At the time of writing, there has been no community transmission of COVID-19 for over 65 days. Although challenges remain, including the uncertainty surrounding the re-opening of Australia’s international border, indicators are increasingly reflecting growth and a return to normality.

[1] CoreLogic Home Value Index
[2] ABS
[3] City of Melbourne Pedestrian Counter
[4] Tourism Research Australia – National Visitor Survey December 2020
[5] Property Council of Australia

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