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Melbourne property market forecast for 2024

Are you wondering what will happen to the Melbourne property market in 2024?

Clearly, the Melbourne housing market has not performed as strongly as some other capitals over the last year, but Melbourne’s property values are expected to gain ground as we move through 2024.

Melbourne's property markets update

Melbourne's property values have risen 10.9% since the onset of Covid, but are still  -4.2% below their previous peak in March 2022.

Here is the latest data on the median property prices for Melbourne.

Property Median price Δ MoM Δ QoQ Δ Annual
All dwellings $777,250 -0.1% -0.9% 3.9%
Capital city houses $942,750 0.0% -0.8% 4.3%
Capital city units $608,181 -0.3% -1.3% 3.1%
Regional dwellings $568,691 0.0% 0.3% -1.3%

Source: CoreLogic, February 2024

Melbourne’s listings and clearance rates have held up.

Property sellers have begun 2024 by erring on the side of caution with fewer properties being listed for sale as vendors sit on their hands and wait out uncertainty...

However, at Metropole Brisbane we’re finding that strategic investors and homebuyers are back actively looking to upgrade, picking the eyes out of the market.

SQM Research reports that in Melbourne in January 2024:

  • The total number of properties listed for sale in Melbourne is 32,684
  • This is down -8.3% over the previous month
  • However, listings are up 6.2% over the year

Total Property Listings Melbourne 26 February

Source: SQM Research

But at Metropole Melbourne we’re finding that strategic investors and homebuyers are back actively looking to upgrade, picking the eyes out of the market.

Similarly, the Melbourne auction market started the year strongly showing a significant depth of buyers in the market.

Fig02

While the data is insightful, as we know, Melbourne’s market is not a one-size-fits-all property market and A-grade homes and investment-grade properties remain in strong demand and are likely to outperform, many holding their values well.

There is a clear flight to quality with A-grade homes and investment-grade properties still in short supply for the prevailing strong demand, but B-grade properties are taking longer to sell and informed buyers are avoiding C-grade properties.

This is creating a window of opportunity for homebuyers and property investors with a long-term perspective.

Sure, many discretionary buyers and sellers have left the market at present, but life will go on in the Victorian capital – people will get married, people will get divorced, families will have babies and many Melbournians are going to need to move house.

When they realise interest rate rises have stopped (and we're possibly there already) and that inflation is under control (and we're past the peak already) they will come back into the market with a vengeance.

Melbourne’s rental markets remain exceptionally tight

Vacancy rates in Melbourne’s rental market are usually very tight, often sitting below the national baseline.

And thanks to soaring demand and a severe undersupply across Victoria, and the rest of the country, the national vacancy rate is exceptionally low today by historical standards.

SQM Research reports Melbourne’s vacancy rate at 1.5%.

By comparison, the vacancy rate which represents a balanced market, is around 2-2.5%.

Residential Vacancy Rates Melbourne 26 February

Source: SQM Research

Of course, this isn’t news.

As we know, Melbourne’s rental market, like most places across the country, has plunged into crisis.

Near-record-low vacancy rates, high rent prices, strong demand, and a rising population have combined to push the city’s market into a high-pressure cooker environment.

The data for vacancy rates and also weekly rent listings highlights that the distressing state of Melbourne’s rental market leads to a bleak outlook for renters.

Weekly Rent Listings Melbourne 26 February

Source: SQM Research

Melbourne's decline in vacancy rates and number of rental listings can be attributed to two factors:

  1. One major factor is the city's strong economy and job market. Melbourne is home to a number of major industries, including finance, technology, and healthcare, which are driving the demand for housing.
  2. Another factor is the city's growing population.  Melbourne's population has been growing steadily in recent years, with more people moving to the city to take advantage of its job opportunities and quality of life.

This increased demand for housing has led to competition among renters, driving down vacancy rates.

Overall, the decline in vacancy rates in Melbourne is a sign of the city's strong economy and growing population.

While it may be more difficult for renters to find a property, the city remains an attractive place to live and work.

Key trends for Melbourne’s housing market 2024

The Melbourne property market has been one of the strongest and most consistent performers over the last four decades.

But the COVID-19 pandemic and numerous city lockdowns hit the city hard – many residents fled northwards to Queensland and closed borders halted migration from overseas.

From the economic fallout of the COVID-19 pandemic and being locked down for longer than any other city in the world, to 13 interest rate rises, the lowest level of consumer confidence in decades, and a continuous conveyor belt of negative messages in the media, tightening of lending restrictions, the Melbourne property markets have faced considerable headwinds.

After booming through 2020 and 2021 with prices rising by 15.8%, Melbourne housing values fell -7.9% from their peak in March 2022 through to the recent trough in January 2023.

While the Melbourne housing market turned the corner in early 2023, property price growth has been slower than in some other capital cities.

Any way that you look at it, Melbourne has now clearly passed the bottom of the downturn, and while Melbourne has not seen as sharp a recovery in prices this year as Sydney has, it also did not see as large a decline in 2022.

And there are firm indications that Melbourne property values and rents will keep rising in 2024.

Having said that, Melbourne’s housing markets were fragmented in 2023 with more than 50 Victorian suburbs seeing house prices exceed the average national house price growth for the year.

Across sub–regions, Melbourne's Inner and Outer East are outperforming marginally while the North West and West are seeing prices stabilise rather than rise.

Conditions are notably softer outside the capital, with property prices in most regional centres in Victoria falling or at best only stabilising.

And it’s worth remembering that even though Melbourne’s property market underperformed in 2023, it has been one of the strongest and most consistent performers over the last four decades.

Melbourne's population growth vs. housing market

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Note: Projected population growth will continue to support Melbourne’s recovery, but will also pose problems.

Currently, there are 5.8 million people living in Melbourne, and 6.8 million in Victoria.

Victoria experienced the biggest population increase over the year to June 2023.

This can mostly be accounted for by a steady inflow of interstate and international arrivals and a subdued number of Victorians leaving the state (compared to other states which have had higher arrivals but also higher departures).

Annual population change

State Current Population Change over previous year Change over previous year (%)
New South Wales 8.3393m 172.6k 2.10%
Victoria 6.8125m 181.8k 2.70%
Queensland 5.4594m 138.5k 2.60%
South Australia 1.8517m 30.5k 1.70%
Western Australia 2.8786m 86.8k 3.10%
Tasmania 572.8k 1.7k 0.30%
Northern Territory 252.5k 2.2k 0.90%
Australian Capital Territory 466.8k 9.9k 2.20%
Australia 26.6385m 624.1k 2.40%

Source: ABS data

And the population growth is expected to continue growing too.

The Victorian government has a business plan to increase Melbourne's population by 2050 to 8 million people, which will put Victoria’s population at around 10 million people.

This means that over the next 30 years, Melbourne is likely to require 1.5 million more dwellings which will be made up of 530,000 detached houses, 480,000 apartments, and 560,000 townhouses.

While this increased demand is likely to translate to continued strong property price growth and a more robust economy, which is great news for investors, its infrastructure will struggle to keep up.

However Melbourne's public transport system, in particular, is struggling to keep up with the increased demand, leading to overcrowding, delays, and other issues.

The city's roads are also becoming increasingly congested, making it difficult for people to get around.

To address these challenges, the Victorian government has committed to investing heavily in public transport infrastructure.

The Metro Tunnel project, for example, will create a new underground rail line through the CBD, while the Suburban Rail Loop project will create a new orbital rail line connecting Melbourne's suburbs.

These projects will help to relieve congestion on Melbourne's roads and public transport system, providing much-needed relief to commuters.

The local government also has plans to invest in the city’s sustainable infrastructure and practices and is looking to develop new areas in surrounding suburbs to help facilitate the impending population boom.

Melbourne’s top performers for 2023

2023 was a year when our property markets began the new phase of the property cycle - the recovery phase.

Even despite higher interest rates, sky-high inflation, and tightened lending, property markets across the country rebounded from their January 2023 trough.

And some even recovered or exceeded prices from the previous record high.

Although, as always, there is not one “Melbourne property market” and some segments outperformed others.

Here are some of the best performers for Melbourne in 2023, according to CoreLogic’s Best of the Best report 2023:

House Sales - Best Performers 2023

Feature Suburb / Area Numbers
Most expensive suburb TOORAK (MELBOURNE - INNER) $5,871,615
Most affordable suburb RAINBOW (NORTH WEST) $149,475
Strongest 12 month growth in values KYABRAM (SHEPPARTON) 13.90%
Strongest 12 month decline in values ROCHESTER (SHEPPARTON) -26.00%
Strongest 12 month growth in rents KEW EAST (MELBOURNE - INNER EAST) 24.50%
Highest gross rental yields NHILL (NORTH WEST) 7.30%

Unit Sales - Best Performers 2023

Feature Suburb / Area Numbers
Most expensive suburb BEAUMARIS (MELBOURNE- INNER SOUTH) $1,304,489
Most affordable suburb MOE (LATROBE - GIPPSLAND) $267,646
Strongest 12 month growth in values BALWYN NORTH (MELBOURNE - INNER EAST) 14.00%
Strongest 12 month decline in values BLACK ROCK (MELBOURNE - INNER SOUTH) -9.00%
Strongest 12 month growth in rents TRAVANCORE (MELBOURNE - INNER) 22.30%
Highest gross rental yields CARLTON (MELBOURNE - INNER) 7.20%

 

And these are the Melbourne and regional Victorian suburbs with the top sales in 2023:

Top House Sales - Greater Melbourne

# Suburb Region Number sold 12m 2023 Total value 12m 2023 Median value 2023
1 Brighton Melbourne - Inner South 220 $892,575,022 $3,494,479
2 Glen Waverley Melbourne - South East 447 $860,680,544 $1,787,498
3 Toorak Melbourne - Inner 117 $853,106,975 $5,871,615
4 Point Cook Melbourne - West 1,003 $844,237,085 $809,447
5 Kew Melbourne - Inner East 245 $815,723,187 $2,685,171

Source: CoreLogic

Top House Sales - Regional VIC

# Suburb Region Number sold 12m 2023 Total value 12m 2023 Median value 2023
1 Ocean Grove Geelong 260 $307,932,350 $1,056,106
2 Torquay Geelong 211 $302,754,714 $1,316,540
3 Mildura North West 592 $272,109,472 $438,924
4 Warrnambool Warrnambool and South West 410 $267,193,060 $588,475
5 Highton Geelong 262 $250,941,800 $968,660

Source: CoreLogic

Top Unit Sales - Greater Melbourne

# Suburb Region Number sold 12m 2023 Total value 12m 2023 Median value 2023
1 Melbourne Melbourne - Inner 1386 $791,729,223 $473,589
2 South Yarra Melbourne - Inner 531 $438,531,768 $618,212
3 Southbank Melbourne - Inner 555 $325,721,813 $585,805
4 Brighton Melbourne - Inner South 198 $294,019,151 $1,165,834
5 Toorak Melbourne - Inner 168 $279,804,456 $1,260,416

Source: CoreLogic

Top Unit Sales - Regional VIC

# Suburb Region Number sold 12m 2023 Total value 12m 2023 Median value 2023
1 Geelong Geelong 77 $64,512,794 $646,803
2 Ocean Grove Geelong 48 $42,894,500 $850,939
3 Belmont Geelong 81 $42,832,999 $506,043
4 Highton Geelong 74 $41,558,998 $524,079
5 Mildura North West 112 $40,548,950 $297,496

Source: CoreLogic

As you can see, Melbourne’s inner areas dominate the strongest markets for 2023 for both houses and units in Greater Melbourne.

In regional Victoria, Geelong dominates the lists with an impressive volume of high-priced property solid over the past year.

As with Sydney and Brisbane, there is a strong correlation between the prices of dwellings in markets and recent growth performance.

This means the ‘higher end’ of the Melbourne market is generally making larger gains.

Melbourne4

Melbourne’s housing market - the forecast for 2024

Digging deeper into the stats, some Melbourne properties - bearing in mind there are multiple markets within markets - have far outperformed others.

But it seems that freestanding Melbourne houses within a close distance of the CBD or in good school catchment zones are the most stable.

It really is a tale of two cities - while some properties over-perform, others underperform.

But the expert consensus is that strong population growth and tight supply will continue to push property prices upwards as we move through this next stage of the property cycle.

And that is even in the face of the Reserve Bank continually hiking interest rates in order to get on top of Australia’s soaring inflation levels.

While Melbourne’s property market has lagged behind Sydney and Brisbane, there are clear indicators that it will continue on its upward trajectory.

Here are some of the most recent expert forecasts to take note of:

  • ANZ forecasts a 3-4% property price rise in Melbourne in 2024.
  • CBA forecasts a 5% property price rise in Melbourne in 2024.
  • NAB forecasts a 5.5% property price rise in Melbourne in 2024.
  • Westpac forecasts a 3% property price rise in Melbourne in 2024.
  • PropTrack forecasts a 1-4% property price rise in Melbourne in 2024.
  • SQM forecasts up to a -3% property price fall in Melbourne in 2024.

You can read our Sydney housing market update here and the Brisbane housing market update here.

Overall though, supply remains constrained much like Australia’s other major cities.

READ MORE: 6 tips for choosing the right investment property

About Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.
363 comments

Hi Michael I've been following your blogs for several years now and really enjoy your perspectives and also those of the numerous comments. I live in Victoria, have one rental property and could be best described as a battler, trying to aspire ...Read full version

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Hi Michael - I just stumbled upon your site, very informative! I’m considering purchasing an investment property (1 or 2 br apartment) in Kensington, Melbourne, off the plan - in what looks to be a sturdy, beautifully designed building, informed by c ...Read full version

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Hi Michael! Great article as always. Keen to get your observations more specifically on the northern suburbs. Bought a 3-bed house as an investment property for ~800k in 2021 in Kingsbury. The average income growth isn’t as strong as east and south e ...Read full version

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