Authored by the expert who managed and guided the team behind the Australia Property Pack
Yes, the analysis of Melbourne's property market is included in our pack
Melbourne's property market is recovering in mid-2025, with median house prices at $939,965-$1,040,000 and units at $614,689.
The market shows renewed buyer interest with property prices expected to grow 2.7-3.5% in 2025 and accelerate to 4-6% in 2026. Foreign buyers face restrictions and can only purchase new builds until March 2027, while locals benefit from falling interest rates and government incentives.
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 offers diverse property options from $614,689 apartments to $1+ million houses, with the market recovering after recent declines. Buyers should focus on middle-ring suburbs for growth potential, understand the complex buying process, and avoid common mistakes like skipping inspections or overpaying in competitive auctions.
| Property Type | Median Price | Typical Yield |
|---|---|---|
| Apartment | $614,689 | 4.0-5.2% |
| Townhouse | $900,000-$1.2M | 3.9% |
| House | $939,965-$1,040,000 | 3.4-4.0% |
| Price Growth 2025 | 2.7-3.5% | Expected |
| Price Growth 2026 | 4-6% | Forecast |
| Vacancy Rate | 1.1-1.6% | Historic Low |
| Foreign Buyer Status | Restricted | New Builds Only |
What property types can you buy in Melbourne - apartments, houses, or townhouses?
Melbourne's residential market offers three main property types, each with distinct price points and ownership structures.
Apartments dominate the inner-city landscape with a median price of $614,689 as of June 2025. They operate under strata title ownership, meaning you'll pay body corporate fees ranging from $3,000-$8,000 annually for maintenance of common areas. These properties attract singles, couples, and investors seeking rental yields between 4.0-5.2%.
Houses represent the traditional Australian dream with freestanding structures on their own land. The median house price in Melbourne sits between $939,965-$1,040,000, offering full freehold ownership and complete renovation freedom. Houses provide the strongest capital growth over time due to land value appreciation, though they require higher maintenance budgets and suit families needing space.
Townhouses bridge the gap between apartments and houses, typically priced $900,000-$1.2 million in inner suburbs. Most operate under strata or community title with lower body corporate fees than apartments. Young families and downsizers favor townhouses for their modern designs and moderate maintenance requirements.
The ownership structure fundamentally differs between property types - houses offer complete control while apartments and townhouses involve shared decision-making through body corporates.
How have Melbourne property prices changed over 5 years and what's ahead?
Melbourne's property market experienced dramatic swings between 2020-2025, creating both opportunities and challenges for buyers.
The market surged 17% in 2021 during pandemic-driven demand, then declined through 2023-2024 as interest rates rose. As we reach mid-2025, prices have recovered modestly but remain 4.5% below the 2022 peak. Over the full 5-year period, Melbourne properties gained 12.8%, significantly underperforming Sydney and Brisbane.
Current median prices stand at $939,965-$1,040,000 for houses and $614,689 for units. The gap between house and unit prices has widened, making apartments increasingly attractive for first-home buyers and investors. Houses have nearly doubled in value over 10 years with 96.15% growth, while apartments lagged behind.
Market forecasts for Melbourne look increasingly positive as interest rates stabilize. PropTrack predicts 2.7-3.5% growth through 2025, accelerating to 4-6% in 2026. Units may outperform houses in the near term due to affordability constraints pushing buyers toward cheaper options.
The recovery signals strengthening fundamentals with auction clearance rates rising and buyer sentiment improving, though Melbourne remains Australia's second-worst performing capital city market over the past five years.
What are the current trends in Melbourne's real estate market?
Melbourne's property market in mid-2025 shows clear signs of recovery with several key trends emerging.
Demand has surged particularly in affordable middle-ring suburbs like Mount Waverley, Glen Waverley, Preston, and Bentleigh. First-home buyers and investors are returning to the market as interest rates fall, with population growth driving sustained demand. Migration patterns show buyers moving from inner areas to middle and outer rings seeking value.
Supply remains critically tight with new listings down and vacancy rates at historic lows of 1.1-1.6%. Construction activity lags population growth, especially for detached houses, creating competitive conditions. The shortage is most acute in family-friendly suburbs with good schools and transport links.
Growing sectors include gentrifying middle-ring suburbs experiencing infrastructure upgrades, affordable outer areas like Melton and Coolaroo attracting first buyers, and premium apartment markets in lifestyle locations including CBD, Docklands, and St Kilda. The "missing middle" of medium-density housing sees strong demand.
Rentvesting trends accelerate as buyers purchase investment properties in affordable areas while renting in preferred locations. Green features and home offices have become essential requirements post-pandemic.
It's something we develop in our Australia property pack.
Should you rent or buy in Melbourne based on your situation?
The rent-versus-buy decision in Melbourne depends heavily on your financial position, job security, and long-term plans.
Renting costs a median $633 weekly for houses and $566 for units as of June 2025. Renting remains cheaper than buying for most houses, with mortgage repayments consuming 61% of median income versus 40% for rental payments. However, unit purchases have reached parity with renting in many suburbs after recent rate cuts.
Buying makes sense if you plan to stay 5+ years, have stable employment, and can afford the deposit. First-home buyers typically need 4-7 years to save a 20% deposit on median incomes. The financial commitment includes stamp duty, legal fees, maintenance, and insurance beyond the mortgage.
Renting suits those with uncertain job prospects, short-term plans, or insufficient deposits. The flexibility allows career moves and lifestyle changes without selling costs. Many successful investors use rentvesting strategies - buying investment properties in affordable areas while renting in preferred suburbs.
Calculate your personal breakeven point by comparing total ownership costs against rental expenses, factoring in capital growth expectations of 2.7-3.5% annually.
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What are the exact steps to buy property in Melbourne?
Buying property in Melbourne follows a structured process requiring careful planning and professional support.
Local buyers start by obtaining mortgage pre-approval to understand their budget. Research suburbs using realestate.com.au and domain.com.au, focusing on properties within your price range. Inspect properties thoroughly, arranging building and pest inspections for serious contenders. Properties sell through private treaty negotiations or public auctions.
Once you've found your property, make an offer or bid at auction. Successful buyers sign contracts and pay a 10% deposit immediately. The finance approval process follows, requiring property valuation and final loan documentation. Settlement occurs 30-90 days later when you pay remaining funds and receive property ownership.
| Step | Timeline | Key Actions |
|---|---|---|
| Pre-approval | 1-2 weeks | Submit financials, receive borrowing capacity |
| Property Search | 2-12 weeks | View properties, arrange inspections |
| Making Offer | 1-3 days | Negotiate price or bid at auction |
| Contract Signing | Same day | Pay 10% deposit, sign documents |
| Finance Finalization | 2-3 weeks | Valuation, approve loan, arrange insurance |
| Settlement | 30-90 days | Final payment, receive keys and title |
| Foreign Buyers Only | +2-4 weeks | FIRB approval before making offers |
Foreign buyers face additional restrictions from April 2025 to March 2027, limited to purchasing new builds or off-the-plan properties only. They must obtain Foreign Investment Review Board (FIRB) approval before buying, pay higher stamp duty rates, and provide 20-30% deposits.
Where do you find properties - which websites and agents are reliable?
Melbourne's property search starts online with established platforms dominating the market.
Realestate.com.au leads as Australia's most visited property portal, followed by domain.com.au. These platforms list 95% of available properties with detailed filters for price, location, and features. Specialized sites include property.com.au for broader searches, homely.com.au for community reviews, and urban.com.au for new developments.
Top-rated real estate agencies in Melbourne include Nelson Alexander, Ray White, Lucas Real Estate, Melcorp, Brady Residential, and Hedley Real Estate. Check agent ratings on ratemyagent.com.au before engaging, looking for consistent 4.5+ star reviews and strong local knowledge.
Buyer's agents provide crucial advantages in Melbourne's competitive market. Leading firms include Elite Buyer Agents, Marsden Buyers Agents, Abode Advocacy Group, Cate Bakos, and National Property Buyers. They access off-market properties, negotiate better prices, and guide you through the complex buying process.
Off-market opportunities represent 20-30% of sales, accessible only through well-connected agents. Building relationships with local agents in your target suburbs increases access to these hidden gems.
What can you afford with your budget across Melbourne neighborhoods?
Your budget determines both property type and location options across Melbourne's diverse suburbs.
- Under $600,000: Units and townhouses in outer suburbs like Melton, Albion, and Herne Hill, or older apartments in middle-ring areas like Notting Hill and Travancore. Houses only available in far outer areas like Norlane and Corio.
- $600,000-$900,000: Townhouses and small houses in gentrifying suburbs including Preston, Reservoir, Bentleigh, and McKinnon. Modern 2-bedroom units in most middle-ring suburbs.
- $900,000-$1.2 million: Family homes in established middle-ring suburbs like Mount Waverley, Glen Waverley, and Essendon. Premium apartments in inner areas.
- $1.2-$2 million: Quality family homes in sought-after school zones, renovated period homes in inner suburbs, or luxury apartments with city views.
- $2 million+: Premium suburbs like Toorak, Brighton, and Hawthorn for houses. Waterfront properties and architectural homes in blue-chip locations.
First-home buyers maximize value in growth corridors 20-40km from CBD where infrastructure investment drives future appreciation. Investors target high-yield areas near universities and transport hubs.
What mistakes do buyers make in Melbourne and how do you avoid them?
Melbourne buyers frequently make costly errors that proper preparation prevents.
The biggest mistake is buying without pre-approval, leading to failed purchases when finance falls through. Always secure pre-approval before viewing properties to understand your true budget including all costs. Skipping building and pest inspections saves $500-$800 upfront but risks discovering $50,000+ in hidden repairs post-purchase.
Emotional bidding at auctions causes overpayment beyond market value. Set a firm limit based on comparable sales and stick to it regardless of competition. Many buyers also underestimate total costs, forgetting stamp duty adds 5.5% to purchase price plus legal fees, moving costs, and immediate repairs.
Inadequate location research leads to lifestyle mismatches and poor capital growth. Spend weekends in target suburbs, check crime statistics, school zones, and planned infrastructure. Missing government grants costs first-home buyers up to $35,000 in available assistance.
Avoid these pitfalls by engaging professionals early - buyer's agents, building inspectors, and experienced conveyancers provide expertise worth their fees.
We did some research and made this infographic to help you quickly compare rental yields of the major cities in Australia versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.
How much does living in Melbourne cost and how does this affect buying?
Melbourne's cost of living directly impacts property affordability and ownership sustainability.
An average family needs $75,000 annually to cover mortgage payments and basic living expenses in 2025. With Melbourne's median household income at $93,548, mortgage repayments for a median-priced house consume 61% of gross income, leaving limited buffer for other expenses.
Monthly living costs beyond housing include groceries ($800-1,200 for a family), utilities ($200-350), transport ($300-500), and healthcare ($200-400). These expenses mean most Melbourne buyers require dual incomes to comfortably afford homeownership.
Property ownership adds ongoing costs often underestimated by first-time buyers. Annual expenses include council rates ($1,500-3,000), insurance ($1,200-2,500), maintenance ($3,000-5,000), and water rates ($1,200). Apartment owners pay additional body corporate fees.
The high cost structure means buyers should budget 30% above mortgage payments for total ownership expenses. Consider suburbs with lower council rates and established properties requiring less maintenance to reduce ongoing costs.
Which Melbourne suburbs suit different buyer goals and budgets?
Melbourne suburbs cater to distinct buyer priorities from affordability to prestige.
It's something we develop in our Australia property pack.
For affordability seekers, outer suburbs like Melton, Coolaroo, Dallas, and Norlane offer houses under $600,000 and strong rental yields of 4.5-5.5%. These areas suit first-home buyers and investors, though longer commutes (45-60 minutes to CBD) and developing infrastructure are trade-offs.
Growth-focused buyers should target middle-ring suburbs undergoing gentrification. Mount Waverley, Glen Waverley, Preston, Bentleigh, McKinnon, Sunbury, Frankston, and Whittlesea combine reasonable prices ($800,000-$1.2 million) with infrastructure upgrades driving 5-7% annual growth potential.
| Buyer Goal | Best Suburbs | Price Range |
|---|---|---|
| Maximum Affordability | Melton, Coolaroo, Dallas | Under $600k |
| First Home Buyers | Werribee, Cranbourne, Pakenham | $600-800k |
| Family Homes | Mount Waverley, Glen Waverley | $1-1.5M |
| Investment Growth | Preston, Bentleigh, McKinnon | $800k-1.2M |
| Premium Lifestyle | Toorak, Brighton, Hawthorn | $2M+ |
| Beach Living | St Kilda, Elwood, Brighton Beach | $1.5M+ |
| Inner City Living | Carlton, Fitzroy, South Yarra | $1.2M+ |
High-end lifestyle buyers gravitate to Toorak, Brighton, Hawthorn, and Deepdene for prestige addresses, elite schools, and established amenities. Houses start at $2 million with limited stock creating competitive conditions.
What's the expat experience like living in Melbourne?
Melbourne consistently ranks among the world's most liveable cities, making it highly attractive for international residents.
The city's cosmopolitan culture embraces diversity with over 200 nationalities represented. English-speaking environment eliminates language barriers while strong expat networks in suburbs like South Yarra, St Kilda, and Prahran provide instant community connections. Professional opportunities abound in finance, technology, healthcare, and education sectors.
Settling logistics prove straightforward with efficient public services and familiar Western systems. Medicare provides quality healthcare after residency establishment. Public transport ranks among the world's best with trams, trains, and buses covering metropolitan areas. International schools cater to expat families maintaining home country curricula.
Melbourne's lifestyle balances urban sophistication with outdoor accessibility. The coffee culture, restaurant scene, and arts festivals create vibrant social opportunities. Weekend escapes to Yarra Valley wineries, Great Ocean Road, and Dandenong Ranges add lifestyle value.
Long-term outlook remains positive with consistent population growth of 2% annually driving property demand. Political stability, strong economy, and quality infrastructure support sustained expat satisfaction and property appreciation.
Which areas work best for long-term rentals and what returns can you expect?
Melbourne's rental market offers strong opportunities with vacancy rates at historic lows of 1.1-1.6%.
Inner-city apartments near CBD, Docklands, and St Kilda achieve highest yields of 4.0-5.1% targeting young professionals and students. These areas benefit from proximity to employment, universities, and entertainment precincts. Modern one-bedroom apartments rent for $500-600 weekly with minimal vacancy periods.
Middle-ring suburbs like Mount Waverley, Preston, and Bentleigh attract family tenants seeking houses with yards near good schools. These properties yield 3.5-4.2% with stable long-term tenancies averaging 2-3 years. Three-bedroom houses command $700-900 weekly depending on condition and exact location.
Tenants prioritize proximity to public transport, particularly train stations enabling CBD commutes under 40 minutes. Modern kitchens, air conditioning, car parking, and outdoor space command premium rents. Properties near hospitals and universities experience consistent demand from medical staff and academics.
Investment returns combine rental yield with capital growth expectations of 2.7-3.5% annually, creating total returns of 6-8% in growth areas.
It's something we develop in our Australia property pack.
What about short-term rentals - what rules apply and which areas work?
Short-term rental regulations in Melbourne vary by council and building, requiring careful research before investing.
State regulations mandate registration of short-term rentals with local councils and compliance with safety standards including smoke alarms, gas safety checks, and appropriate insurance. Many apartment buildings prohibit or cap short-term letting through owners' corporation rules - verify before purchasing.
Best performing areas cluster around tourist attractions and business districts. CBD, Southbank, and Docklands apartments attract business travelers and tourists with nightly rates of $150-300. St Kilda and beachside suburbs appeal to leisure visitors, particularly during summer months and major events.
Carlton serves visiting academics and medical professionals near universities and hospitals. Richmond and Fitzroy attract culture seekers exploring Melbourne's arts scene. Properties near Melbourne Cricket Ground and Rod Laver Arena command premium rates during sporting events.
Returns fluctuate seasonally with 60-80% occupancy achievable in prime locations. Australian Open, Grand Prix, and Spring Racing Carnival create peak demand periods. Annual gross returns can exceed long-term rental income by 30-50% but require active management and higher operating costs.
Conclusion
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's property market presents genuine opportunities in mid-2025 as prices recover from recent declines while remaining below peak levels. Smart buyers focusing on middle-ring suburbs with strong fundamentals can secure properties positioned for solid growth as the market strengthens.
Success requires thorough research, realistic budgeting including all ownership costs, and professional guidance through Melbourne's complex buying process. Whether seeking an affordable entry point or premium investment, Melbourne's diverse market offers options for well-prepared buyers willing to act strategically.
Sources
- Property Update - Property Investment Melbourne
- Marshall White - Melbourne Property Trends
- REA - Townhouse vs House vs Apartment Investment
- Pearson Chambers - Foreign Buyer Ban Melbourne 2025
- Property Analytics - Melbourne Investment Property Types
- Fundmaster - Melbourne Investment Guide 2025
- Search Property - 2025 Property Boom Potential
- LP Advisory - Melbourne Property Market 2025
- Your Mortgage - Buy or Rent Capital Cities
- Buyers Advocate - Melbourne Property Statistics