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Yes, the analysis of Melbourne's property market is included in our pack
Melbourne's property market is showing early signs of recovery after a year of price declines, with values rising 1.2% in the last quarter of 2025.
As we reach mid-2025, Melbourne remains the only major Australian capital city with negative annual price growth at -1.2%, but recent interest rate cuts and government incentives are starting to turn the tide. The market is experiencing a significant shift with units outperforming houses, outer suburbs seeing strong growth, and a critical housing shortage driving renewed buyer interest.
If you want to go deeper, you can check our pack of documents related to the real estate market in Australia, based on reliable facts and data, not opinions or rumors.
Melbourne property prices have declined 1.2% over the past year but are now recovering with quarterly growth of 1.2% as of June 2025.
The market is expected to accelerate with projected growth of 3.5% for houses and 4.7% for units in 2025, driven by interest rate cuts and chronic housing shortages.
| Key Metric | Current Value (June 2025) | 12-Month Change |
|---|---|---|
| Median Dwelling Price | $791,303 | -1.2% |
| Median House Price | $939,965 | -1.0% |
| Median Unit Price | $614,689 | -1.6% |
| Fastest Growing Areas | Sunbury, Beveridge, Werribee | Up to +31.9% (select suburbs) |
| 2025 Growth Forecast | Houses: +3.5%, Units: +4.7% | Accelerating |
| Supply Status | Critical shortage | Worsening |
| Interest Rate Impact | 0.25% cut in May 2025 | More cuts expected |
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
What are Melbourne property prices doing right now in June 2025?
Melbourne property prices are stabilizing and beginning to recover after a challenging year.
As of June 2025, the median dwelling price in Melbourne stands at $791,303, which represents a 1.2% decline over the past 12 months. However, the quarterly data tells a different story - prices have risen 1.2% in the last three months, with May 2025 alone seeing a 0.4% increase.
The median house price currently sits at $939,965, down just 1.0% annually, while units have fallen slightly more at 1.6% to a median of $614,689. According to REIV data from March 2025, these figures align closely with their reported median house price of $922,500 and unit price of $629,000.
Melbourne remains unique among Australian capital cities as the only major market still showing negative annual growth. However, the recent quarterly upturn suggests the worst may be behind us, with buyer confidence returning following the RBA's rate cut in May 2025.
It's something we develop in our Australia property pack.
Where did Melbourne property prices increase the most in the past year?
Several Melbourne suburbs have defied the citywide downturn with remarkable price growth.
The standout performer has been Caulfield South, where unit prices surged an impressive 31.9% over the past year. Other strong performers in the unit market include Springvale with 23.1% growth and Preston at 20.6%, driven by renewed investor interest and first-home buyer demand.
In the house market, outer northern and western suburbs are leading the charge. Sunbury ranks as the top suburb for growth potential in 2025, with median house prices rising 0.8% annually despite the broader market decline. Beveridge follows closely with 0.9% growth, benefiting from improved infrastructure and relative affordability.
The western growth corridor suburbs of Werribee, Caroline Springs, Hoppers Crossing, and Deer Park are all tipped for "supercharged" growth in the coming months. These areas are attracting buyers seeking value, with median house prices often $300,000-$400,000 below inner-city equivalents.
Inner-city areas like Docklands, Hawthorn East, Richmond, and St Kilda are also experiencing a resurgence in their unit markets as students and young professionals return to the city, reversing previous pandemic-era declines.
Which property types are seeing the biggest price increases in Melbourne?
| Property Type | 2025 Growth Forecast | 2026 Growth Forecast |
|---|---|---|
| Houses | +3.5% | +6.0% |
| Units/Apartments | +4.7% | +7.1% |
| Townhouses | +4.5% | +6.8% |
| Inner-City Units | +5.2% | +7.5% |
| Outer Suburb Houses | +4.1% | +6.5% |
Units and apartments are forecast to significantly outperform houses in Melbourne's property market recovery.
Industry forecasts predict units will rise 4.7% in 2025 and accelerate to 7.1% growth in 2026, compared to houses at 3.5% and 6.0% respectively. This reversal of traditional patterns is driven by affordability constraints pushing buyers toward more affordable unit options, particularly in well-located inner suburbs.
The strongest unit growth is expected in inner-city areas where supply remains critically low. Apartment completions in Melbourne's inner city are at their lowest levels since 2008, creating a significant supply-demand imbalance that's pushing prices upward.
How have recent RBA interest rate changes affected Melbourne property prices?
The RBA's May 2025 rate cut is already showing positive effects on Melbourne's property market.
The 0.25% reduction in the cash rate has increased borrowing capacity by approximately $12,000 for the average buyer, directly translating into increased competition and price pressure in both the house and unit markets. This explains the 1.2% quarterly price growth Melbourne experienced in the three months to June 2025.
Market analysts expect further rate cuts later in 2025, which could add significant momentum to price growth. Each additional 0.25% cut typically increases borrowing power by another $12,000, allowing buyers to bid more competitively.
The impact has been particularly pronounced in affordable suburbs and growth corridors where buyers are most sensitive to interest rate changes. Areas like Sunbury, Werribee, and outer northern suburbs have seen immediate increases in buyer activity and auction clearance rates following the rate cut.
Investor activity has also increased markedly, with many returning to the Melbourne market after sitting on the sidelines during the rate hiking cycle of 2023-2024.
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What are Melbourne property price forecasts for 2026 and beyond?
Melbourne property prices are expected to accelerate significantly from their current recovery phase.
For 2026, forecasts predict house prices will grow 6.0% while units surge 7.1%, marking a strong rebound from the recent downturn. This growth is underpinned by expectations of further interest rate cuts, chronic housing shortages, and Melbourne's relative affordability compared to Sydney and Brisbane.
Looking further ahead, if Melbourne returns to its long-term average growth rate of approximately 7% annually, the median house price could reach $1.5 million by 2030 - up from today's $939,965. Units are projected to hit $985,000 by the same date.
By 2045, following historical doubling patterns every 10 years, Melbourne's median house price could approach $3 million. However, these long-term projections assume continued population growth, economic stability, and no major policy interventions.
The immediate outlook remains particularly strong for units and outer suburban houses, where supply constraints and affordability advantages are expected to drive above-average growth through 2027.
How does Melbourne compare to other Australian capital cities in June 2025?
Melbourne has fallen behind several other capital cities in the national property price rankings.
Brisbane has overtaken Melbourne as Australia's second-most expensive city for houses, with a median dwelling price of $917,992 compared to Melbourne's $791,303. Brisbane's annual growth of 7.1% starkly contrasts with Melbourne's -1.2% decline.
Sydney remains the most expensive at $1,203,395 for dwellings, while Adelaide ($829,695) and Perth ($813,810) have both surpassed Melbourne in median prices after recording 8.6% annual growth each. Melbourne now offers better value than Brisbane for house buyers, sitting approximately $37,000 below Brisbane's median house price.
This relative affordability is attracting renewed interest from interstate buyers and investors. A recent survey found 44% of buyers expect Melbourne's underperformance to reverse, viewing current prices as a buying opportunity.
Since March 2020, Melbourne has grown just 16.2% compared to 43.3% for Australia's combined capitals, making it the clear laggard in the current property cycle.
What impact has the 2025 Federal Budget had on Melbourne property prices?
The 2025 Federal Budget has introduced several measures directly affecting Melbourne's property market dynamics.
The expanded Help to Buy scheme, with raised income caps and property price limits, is expected to increase first-home buyer participation by 15% annually. This is particularly benefiting Melbourne's mid-tier markets where properties fall within the scheme's price thresholds.
Perhaps more significantly, the two-year ban on foreign buyers purchasing established dwellings, effective from April 2025, has reduced speculative demand. While this initially concerned some sellers, early data suggests local buyer demand has more than compensated for the reduced foreign interest.
The budget's increased funding for modular and prefabricated housing aims to accelerate supply, though experts note it will take 12-18 months before these initiatives materially impact the market. In the short term, the supply shortage continues to support price growth.
We analyze these policy impacts in detail in our Australia property pack.
We made this infographic to show you how property prices in Australia compare to other big cities across the region. It breaks down the average price per square meter in city centers, so you can see how cities stack up. It's an easy way to spot where you might get the best value for your money. We hope you like it.
Is Melbourne experiencing a housing shortage or surplus in 2025?
Melbourne faces a critical housing shortage that's worsening by the month.
Nationally, only 938,000 new dwellings are expected to be completed over the next five years - a massive shortfall of 262,000 homes against the government's 1.2 million target. Melbourne's share of this shortage is particularly acute in the apartment sector.
Inner-city apartment completions have plummeted to their lowest levels since 2008. This is creating severe pressure in both rental and owner-occupier markets, with vacancy rates at historic lows and rental yields increasing.
The shortage is most pronounced in well-located areas near employment and transport hubs. Higher-density apartment developments remain stalled due to construction costs and feasibility concerns, while detached house construction dominates new supply in outer suburbs.
This structural undersupply is a key driver of price growth forecasts, with no relief expected before 2027 at the earliest. The shortage is particularly benefiting existing property owners and creating challenges for first-time buyers.
What are the main drivers pushing Melbourne property prices in 2025?
- Population growth and migration: International student returns and skilled migration are adding approximately 150,000 people annually to Victoria, with most settling in Melbourne.
- Interest rate cuts: The May 2025 rate reduction has increased borrowing capacity, with further cuts expected to add momentum through late 2025 and 2026.
- Chronic undersupply: With apartment completions at 17-year lows and new home construction failing to meet targets, the supply-demand imbalance continues to worsen.
- Infrastructure investment: Major transport upgrades in growth corridors like Sunbury, Beveridge, and Werribee are making these areas increasingly attractive to buyers.
- Affordability migration: Buyers priced out of inner areas are driving demand in middle and outer suburbs, creating ripple effects across the entire market.
- Government incentives: Expanded Help to Buy schemes and stamp duty concessions are enabling more buyers to enter the market.
- Investor return: After two years of sitting on the sidelines, investors are returning to capitalize on improving rental yields and expected capital growth.
How have foreign investment patterns changed in Melbourne's property market?
Foreign investment in Melbourne real estate has decreased significantly following recent policy changes.
The two-year federal ban on foreign purchases of established dwellings, implemented in April 2025, has removed a traditionally important buyer segment from the market. This measure aims to improve affordability and access for local buyers.
Prior to the ban, foreign buyers represented approximately 5-8% of Melbourne's property transactions, concentrated in inner-city apartments and premium suburbs. Their absence has initially reduced competition in these segments, though local buyer demand has largely filled the gap.
Foreign investment is now restricted to new developments only, which may actually benefit Melbourne's chronic supply shortage by encouraging more construction. Developers report continued interest from overseas buyers in off-the-plan projects, particularly in areas like Box Hill, Glen Waverley, and the CBD.
The policy change has been described by some analysts as "political theatre" given Melbourne's market is overwhelmingly dominated by local buyers. However, it has provided a psychological boost to first-home buyers who perceive less competition.
How does Melbourne's 2025 property market compare globally?
| City | Median Price (USD) | Annual Growth | Price/Income Ratio |
|---|---|---|---|
| Melbourne | $515,000 | -1.2% | 9.2 |
| Sydney | $782,000 | +1.1% | 13.8 |
| London | $725,000 | +3.5% | 11.5 |
| Toronto | $680,000 | +2.8% | 10.1 |
| Singapore | $1,250,000 | +5.2% | 15.2 |
| Auckland | $735,000 | +4.1% | 10.8 |
| Vancouver | $890,000 | +3.9% | 12.3 |
Melbourne's property market has significantly underperformed comparable global cities in recent years.
With just 16.2% growth since March 2020, Melbourne lags well behind most international peers who have seen 25-40% appreciation over the same period. This underperformance has improved Melbourne's relative affordability, with a price-to-income ratio of 9.2 compared to Sydney's 13.8 and Singapore's 15.2.
The current negative growth of -1.2% makes Melbourne unique among major global cities, most of which continue to see positive price momentum. However, this positions Melbourne as potentially offering better value for international buyers and expats.
Full insights on Melbourne's global positioning are available in our Australia property pack.
Which Melbourne suburbs offer the best growth potential for the rest of 2025?
Several Melbourne suburbs stand out as having exceptional growth potential through late 2025.
Sunbury leads the pack, ranked as the top suburb for price growth potential thanks to major infrastructure improvements, relative affordability with median house prices around $650,000, and strong population growth. Sales activity has already surged, with properties selling 15-20% faster than in 2024.
Beveridge, Werribee, Caroline Springs, Hoppers Crossing, and Deer Park form a western growth corridor set for "supercharged" appreciation. These areas benefit from improved transport links, significant residential development, and median prices often $300,000-$400,000 below inner suburbs.
For unit buyers, inner-city suburbs like Docklands, Hawthorn East, Richmond, and St Kilda offer strong potential as young professionals and students return. These areas are reversing pandemic-era price declines with some already showing 5-10% quarterly growth.
Emerging hotspots include Melton South, Wyndham Vale, and Tarneit in the west, plus Clyde North and Officer in the southeast. These areas combine affordability, new infrastructure, and strong population growth - the perfect recipe for capital appreciation.
Conclusion
Yes
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
Melbourne property prices are beginning to recover after a challenging period, with quarterly growth of 1.2% signaling a market turnaround. While annual prices remain down 1.2%, making Melbourne the only major Australian city with negative growth, the combination of interest rate cuts, chronic housing shortages, and government support measures are creating conditions for accelerated growth.
The outlook for Melbourne property is increasingly positive, with houses forecast to grow 3.5% in 2025 and 6.0% in 2026, while units are expected to outperform at 4.7% and 7.1% respectively. With Melbourne now offering better value than Brisbane and significant room to catch up to other capitals, the market appears poised for a strong recovery phase through 2026 and beyond.
Sources
- Property Update - Latest Median Property Prices
- UP Australia - Q1 2025 Melbourne Residential Market
- REA - Melbourne's Supercharged Suburbs 2025
- KPMG - House and Unit Prices Forecast 2025
- Australian Government - Federal Budget Housing
- NHSAC - State of Housing System 2025
- MacroBusiness - Buyers Line Up for Melbourne Property
- Domain - Melbourne Suburbs Bucking Price Trends
- Foreign Investment Review Board - Residential Guidelines
- PropTrack Home Price Index February 2025