Melbourne’s property market is showing continued signs of life, moving through its fourth consecutive month of growth. While the recovery is steady, it’s occurring within a broader national context of shifting interest rate expectations and varying affordability pressures. Let’s dive into what this means for Melbourne.
The positive influence of February’s rate cut is still rippling through the market, contributing to the consistent, albeit modest, rise in Melbourne’s housing values. This growth follows a significant 10-month downturn, and while the market is on the up, values still have some ground to make up.
- Median Dwelling Value: Now sits at $791,303
Note: Melbourne home values remain 4.5% (approximately $37,000) below their record highs seen in March 2022.
Melbourne housing market trends
| Metric | Value | Change (Three Months) | Change (Twelve Months) | Avg. Annual Growth (Past Decade) |
|---|---|---|---|---|
| Median Dwelling Value | $791,303 | +1.2% | -1.2% | +3.6% |
| Median House Value | $939,965 | |||
| Median Unit Value | $614,689 |
Source: Cotality Australia
This steady growth indicates a market that’s finding its feet, buoyed by more favourable borrowing conditions and renewed buyer interest.
Despite the national conversation around stretched housing affordability, Melbourne continues to present as one of the relatively more affordable capital city markets on the eastern seaboard.
When compared to other major capitals, Melbourne’s median dwelling value is lower than Sydney and Brisbane. In fact, only Hobart and Darwin currently boast lower median dwelling values nationally. This relative affordability could be a key factor attracting buyers back into the market.
- Also read:Melbourne property market forecast for 2025 | Is it a good time to invest in Melbourne?
- Also read:Latest property price forecasts for 2026 revealed. What’s ahead in our housing markets in the next year or two?
- Also read:Brisbane Property Market Forecast [2026] – What’s Ahead & Where to Invest
- Also read:Sydney property market forecast for 2026. Is it a good time to invest in Sydney?
- Also read:Lower Interest Rates Drive Home Prices Higher and Higher Over June | Latest Housing Market Stats Dr. Andrew Wilson
Stock levels are tracking 4.5% lower than the same time last year. They are also 1.3% below the previous five-year average. This reduction in available properties, combined with steady to improving buyer demand, is a classic recipe for upward pressure on prices.
- Weekly Rent (Houses): $575
- Weekly Rent (Units): $570
- Gross Rental Yield (Houses): 3.2%
- Gross Rental Yield (Units): 4.9%
- Annual Change in Rent (Houses): +1.2%
- Annual Change in Rent (Units): +1.9%
Even with persistently tight vacancy rates nationally (1.7% for combined capitals, 1.6% for combined regionals), the sheer height of current rents is making further strong rises difficult.
Melbourne house prices – the longer-term data
Several broader factors are influencing Melbourne’s market trajectory:
- First Home Buyer Initiatives: Renewed political certainty following the federal election and government initiatives like deposit guarantees could be encouraging financially capable first home buyers to enter the market.
- Interest Rate Cuts: The recent cuts and the widespread expectation of further reductions throughout 2025 are fueling momentum and buyer confidence.
- Improved Auction Clearance Rates: Nationally, auction clearance rates rose to 65.1% after May’s interest rate cut – the highest since July of the previous year, indicating stronger buyer sentiment.
- Market Convergence: The performance gap between capital cities is narrowing, suggesting a more synchronised national market cycle, with Melbourne participating in this recovery.
The Reserve Bank of Australia (RBA) appears more comfortable with the inflation path, expecting core inflation to sit within the 2–3% target range by June this year and hold there until at least mid-2027. This outlook, coupled with an expected loosening of the labour market (unemployment forecast to rise to 4.3% by year’s end) and relatively soft but positive GDP growth (forecast at 2.1% for the 2025 calendar year), all point towards a supportive environment for potentially lower interest rates. This should, in turn, bolster consumer sentiment and housing activity.
However, there are constraining factors:
- Housing Affordability: Remains a significant hurdle nationally, with the dwelling value-to-income ratio at a record 8.0 at the end of last year, and loan serviceability at all-time highs.
- Lending Policies: Prudent lending (borrowers with debt-to-income ratios above 6× comprising less than 6% of new loans) will likely keep a lid on excessive exuberance.
- Lower Population Growth: As “COVID catch-up” migration normalises, this may temper overall housing demand, though it could also ease pressure on the rental market.
Overall, Cotality expects Melbourne (and national) housing values to post a modest rise in 2025, albeit at a slower pace than experienced in 2024.
Melbourne’s property market is clearly in a phase of recovery and renewed, if measured, growth. Its relative affordability compared to other major cities, coupled with a tightening supply and the prospect of further interest rate relief, paints a picture of cautious optimism for the remainder of 2025.
