Melbourne housing market update [video] | December 2025

Key takeaways

Melbourne recorded the lowest monthly rise of any capital city at 0.3% in November, contributing to a slowdown in the national growth rate.

Relative affordability compared to other major cities supports the highest share of First Home Buyers (27%) in the country, with growth concentrated in the broad middle market.

Despite soft growth, advertised stock levels are 6% below the five-year average and 10% lower than a year ago, providing underlying support against economic headwinds.

Melbourne is continuing to record relatively soft but positive growth conditions, with home values up 0.3% in November. This was the lowest monthly rise of any capital city, contributing to a subtle slowdown in the national growth rate. While local housing values have been rising since February, they remain 0.9% below the record high set in March 2022.

Growth Trends and Affordability Advantage

Melbourne's growth is distinct from the national trend. While most capitals see the fastest growth in the lower price quartile, Melbourne's growth is strongest across the broad middle of the market.

Note: The city's soft growth performance is partially offset by a silver lining: its housing affordability is relatively healthier compared to other major capitals, which supports a high level of first home buyer activity.

Source: Cotality, December 2025

Supply Dynamics and Scarcity

Despite a rise in new listings through spring, supply levels remain tight when measured against longer-term trends. This scarcity continues to provide underlying support for property values and prevents a market correction:

• Listings are tracking 10% lower than they were a year ago.
• Stock levels are 6% below the previous five-year average for this time of the year.

Macroeconomic Headwinds and Regulatory Risks

Note: Melbourne’s market stability is challenged by strong national headwinds that act as a ceiling on potential growth.

Housing dynamics are becoming more complex, with stretched affordability and serviceability posing major obstacles:

• Serviceability Barriers: Nationally, 45% of gross household income is required to service a mortgage at the median value, a near-record high. This impacts borrowing capacity and pushes buyers toward lower price points.
• Interest Rates: The expectation of extended stable interest rates, following the Q3 inflation shock, means there will be no material boost to borrowing capacity from here, further exacerbating the serviceability challenge.
• Regulatory Tightening: A new phase of macroprudential credit tightening has begun, including a 20% limit on high Debt-to-Income (DTI) ratio lending. While this specific limit may not immediately slow prices, it signals that APRA is vigilant. Any further adjustment, such as renewed limits on investor credit growth (given investors comprise 41% of national home lending), poses a substantial downside risk.

Overall, while downside risks are significant, persistently low supply across both the established and new housing sectors is expected to continue outweighing these factors. Home values are projected to continue their rise through 2026, though the pace of gains is likely to slow as affordability constraints impose a natural ceiling on prices.

About Tim Lawless Tim is Research Director at Cotality (formerly CoreLogic), analysing real estate markets, demographics and economic trends across Australia. Visit www.corelogic.com.au