Melbourne Property Market Insights and Trends 2025
Melbourne property market hasn’t been the hottest in recent years compared to some other capital cities, but there are definite signs of improvement. Experts are forecasting a rebound in property values over the next year or two, so things are looking up.
We’re already starting to see some early signs of a shift. Buyer and seller confidence is building, auction clearance rates are holding strong, and demand from buyers remains solid across most segments of the market.
While Melbourne properties may still be undervalued right now, it’s important to note that not all properties are equal. Knowing where and what to buy is key—especially in the suburbs that are expected to see growth.
Some people might be waiting for interest rates to drop, but they could find themselves in a bidding war once that happens. And with vacancy rates at record lows, the rental market is also heating up across the city.
Melbourne’s Rental Market: A Tough Time for Renters
The rental market in Melbourne is under serious pressure. Vacancy rates have plummeted to just 1.5%, and rents are on the rise. This is being driven by Melbourne’s growing population and strong demand for rental properties.
Melbourne is a hub for major industries like finance, technology, and healthcare, which are attracting more people to the city. As more people move here for job opportunities and the city’s lifestyle, competition for rental homes is getting fiercer.
This tight rental market is a reflection of Melbourne’s economic strength and its appeal as a place to live. But for renters, it’s becoming harder to find affordable housing.
What’s Next for Melbourne Property Market?
Historically, Melbourne property market has been one of the strongest performers in Australia over the last four decades. But in the past few years, it’s been overshadowed by cities like Sydney and Brisbane.
While many other capital cities saw double-digit growth last year, Melbourne property market remained relatively flat. Since the start of the pandemic in March 2020, property values here have risen by 10.6%, but they’re still down 4.4% from the peak in March 2022.
Here’s a snapshot of the latest property prices in Melbourne, according to CoreLogic (as of September 2024):
What’s Been Holding Melbourne Back?
So, why hasn’t Melbourne bounced back as quickly as other capital cities? One of the main reasons is the state’s economy. Victoria has faced some serious challenges over the past few years, including a net loss of 7,606 businesses during the 2022-23 financial year (according to ABS data).
The extended lockdowns during the pandemic, along with higher taxes, have weighed heavily on the state’s economy. New payroll taxes, introduced as part of a levy to pay off COVID-19 debt, have also made things harder for businesses. And when businesses struggle, it has a knock-on effect on the property market.
Why Some Investors Are Leaving Melbourne
Many property investors have become frustrated with Melbourne property market. The city has introduced stricter tenancy laws and increased land taxes, making it more difficult for landlords. With tenant-friendly reforms and rising land taxes, some investors are choosing to leave the market.
Still, even with these challenges, there’s opportunity. With property prices currently below replacement cost, investors who are willing to stay the course may find themselves in a strong position when the market rebounds.
Signs of Recovery in the Auction Market
Despite the challenges, Melbourne’s auction results show that there’s still plenty of demand from buyers. The auction market kicked off 2024 on solid footing, with lots of eager buyers actively searching for homes.
It’s worth noting that not all properties are in high demand. A-grade homes and investment-grade properties are still selling quickly, while B-grade properties are sitting on the market longer. C-grade properties? They’re getting overlooked.
For buyers with a long-term perspective, this is a good opportunity. Right now, there’s less competition from discretionary buyers and sellers. But as soon as interest rates stabilize and inflation gets under control, we’re likely to see more buyers re-enter the market.
Why This Could Be a Great Opportunity for Investors
The fact that Melbourne property market hasn’t performed as well as some others presents an opportunity for smart investors. Melbourne properties have a lot of upside potential, especially compared to Sydney, where homes are significantly more expensive. In fact, the average house in Melbourne is about 41% cheaper than a home in Sydney—that’s a difference of more than $600,000.
For long-term investors, now could be the perfect time to enter the market. Many properties are currently being sold for less than what it would cost to replace them, which means there’s room for growth as the market starts to pick up again. If you get in early, you could benefit not only from Melbourne’s long-term growth but also from the immediate boost when the market catches up.
Looking Ahead: What to Expect in 2025
Melbourne’s property market may not have soared like Sydney’s or Brisbane’s recently, but the worst of the downturn seems to be behind us.
In fact, property prices are expected to rise in 2025. The number of new homes being built is at its lowest level in a decade, but demand remains strong, especially with Melbourne’s population growing rapidly. Over the next 30 years, the city will need about 1.5 million new homes to keep up with demand.
Long-Term Growth Prospects
If you’re thinking long-term, Melbourne property market remains one of the most consistent in Australia. Population growth continues to drive demand for housing, and low vacancy rates are pushing up rents. While the city’s infrastructure and public transport systems may be struggling to keep pace, the Victorian government is investing heavily in projects like the Metro Tunnel and Suburban Rail Loop to ease congestion.
For investors, the next few years could present a unique opportunity. Property prices are predicted to rise gradually, with forecasts suggesting growth of between 3% and 5.5% in 2024. And over the long term, Melbourne is likely to return to its typical growth rates, offering strong returns for those who act early.
Closing Insights
Melbourne property market is at a critical juncture. While it hasn’t performed as well as some other cities in recent years, that just means there’s a window of opportunity for smart investors and homebuyers.
With prices below replacement cost and the potential for significant long-term growth, Melbourne is still an attractive option—whether you’re looking to invest or find your forever home. The key is to get in now, before the market fully rebounds and competition increases.
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