Should you buy property in Melbourne now?

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

Who is the author of this content?

BAMBOOROUTES

A team specialized in real estate investing in APAC countries (Japan, Thailand, Indonesia, Australia, etc.).

We are a team of financial experts, legal professionals, developers, and local real estate specialists dedicated to helping people like you avoid mistakes when investing in real estate in a foreign place, particularly in Melbourne. If you'd like to learn more about us, you can check our presentation page.

How this content was created 🔎📝

At BambooRoutes, we explore the Australian real estate market every day. Our team doesn't just analyze data from a distance—we're actively engaging with local realtors, investors, and property managers in cities like Melbourne, Sydney, and Brisbane. This hands-on approach allows us to gain a deep understanding of the market from the inside out.

These observations are originally based on what we've learned through these conversations and our observations. But it was not enough. To back them up, we also needed to rely on trusted resources

We prioritize accuracy and authority. Trends lacking solid data or expert validation were excluded.

Trustworthiness is central to our work. Every source and citation is clearly listed, ensuring transparency. A writing AI-powered tool was used solely to refine readability and engagement.

To make the information accessible, our team designed custom infographics that clarify key points. We hope you will like them! All illustrations and media were created in-house and added manually.

What's the current average property price in Melbourne, and how has it changed over the past 12 months?

Melbourne's median house price currently sits between $952,000 and $983,000 as of September 2025.

Over the past 12 months, median house prices have grown by 2-2.8%, representing an increase of approximately $22,000-$24,000. This growth marks a significant recovery from the mild downturn experienced in 2024.

Unit prices have also strengthened, with the median apartment price now ranging from $621,000 to $628,000. Units have experienced growth of 1-3.5% depending on the specific area, showing slightly more varied performance across different suburbs.

The Melbourne residential market has shifted from slow growth in early 2025 to a steady recovery phase, driven by interest rate cuts and improved buyer confidence. This represents a clear turning point from the previous year's challenging conditions.

It's something we develop in our Australia property pack.

How are short-term market trends (3–6 months) different from medium-term (1–3 years) and long-term (5–10 years) projections?

Short-term trends show monthly price increases of 0.4-1.2%, indicating a slow but positive trajectory sparked by recent interest rate cuts.

Medium-term forecasts for 2025-2027 predict annual growth of 3.5-6%, fueled by population growth, renewed investor confidence, and stable interest rate environment. This represents a significant acceleration from current growth rates.

Long-term projections reveal that Melbourne houses have delivered 6-7% compound annual growth over the past 10 years, while the overall average has been approximately 3.4% annually. The city remains positioned as a top long-term investment choice in the Australian property market.

The key difference lies in momentum - short-term growth is cautious and recovery-based, medium-term outlook is optimistic with strong fundamentals, while long-term performance shows Melbourne's consistent outperformance as a property investment destination.

Which suburbs are showing the strongest growth right now, and which areas are expected to perform best over the next few years?

Currently, inner and middle ring suburbs with strong owner-occupier appeal are leading price increases.

The strongest performing suburbs right now include Blackburn, Kensington, St Kilda West, West Footscray, and various gentrifying areas. These locations combine accessibility, lifestyle amenities, and supply constraints that drive consistent demand.

For future performance, focus on locations with tight supply, family appeal, and active infrastructure development. Established, well-connected suburbs with strong local economies and infrastructure growth are expected to outperform significantly.

Areas to avoid include oversupplied high-rise pockets and generic new developments without unique locational advantages. The market clearly favors suburbs with scarcity, quality housing stock, and owner-occupier appeal over mass-market developments.

Are houses, townhouses, or apartments performing better in terms of value growth and rental yield?

Property Type	Capital Growth (2025)	Rental Yield	Best For
Houses	2.8% annually	3.2-3.8%	Long-term capital growth
Townhouses	2.5-2.8% annually	3.5-4%	Balanced growth and yield
Apartments (Units)	1-3.5% annually	4.5-5%	Rental income and affordability
Inner-city Units	2-3% annually	4.5-4.9%	High rental demand areas
Outer Suburb Units	1-2.5% annually	5%+	Maximum rental yield

What's the current rental demand and vacancy rate across different parts of Melbourne?

Melbourne's rental market is experiencing exceptionally strong demand with vacancy rates at a historically low 1.5%.

This tight rental market spans across all areas of Melbourne, creating excellent conditions for property investors. Weekly median rent sits at approximately $575 for both houses and units, with annual rental growth of 0.7% for houses and 1.7% for units.

The strong rental demand is driven by population growth, limited rental stock, and increased investor caution about new supply. Inner-city areas show slightly tighter vacancy rates around 1.2%, while outer suburbs maintain rates around 2%.

This rental market strength provides excellent cash flow opportunities for investors, particularly in unit investments where rental yields are more attractive than house investments.

How do rental yields compare between inner-city areas, middle suburbs, and outer suburbs?

Inner-city areas deliver rental yields of 3-3.2% for houses and 4.5-4.9% for units, with the lowest vacancy rates around 1.2%.

Middle suburbs provide slightly better yields at 3.2-3.5% for houses and 4.8% for units, with vacancy rates around 1.5%. These areas often offer the best balance of yield and capital growth potential.

Outer suburbs generate the highest rental yields at 3.2-3.8% for houses and 5% for units, though vacancy rates are marginally higher at around 2%. The trade-off is typically slower capital growth in exchange for superior rental returns.

Units consistently outperform houses for rental yield across all locations, making them more attractive for income-focused investors. Houses provide better long-term capital appreciation potential.

What government policies, interest rate changes, or tax incentives are influencing Melbourne's property market at the moment?

Recent and anticipated interest rate cuts have significantly improved affordability and buying activity in Melbourne's property market.

Changes to land tax and the expansion of the Vacant Residential Land Tax are influencing investment decisions, particularly affecting investors who leave properties unoccupied. These measures aim to increase rental supply.

Stricter rental reforms including improved standards, enhanced eviction protections, and potential rent caps are affecting investor sentiment and supply dynamics. While protecting tenants, these changes may discourage some property investors.

The combination of lower interest rates and evolving rental legislation creates a mixed environment - improved affordability for buyers but increased compliance costs for investors.

How much capital growth potential is there in established suburbs compared to new developments or off-the-plan projects?

Established suburbs with well-located houses and townhouses demonstrate superior long-term capital growth and strongest resale performance.

New developments and off-the-plan projects generally deliver weaker price growth due to oversupply and lower demand from quality tenants. Units in outer suburbs and new precincts consistently underperform established properties.

The performance gap is significant - established properties benefit from scarcity, proven demand, and mature infrastructure, while new developments often face competition from similar nearby projects. Off-the-plan buyers also face completion risks and potential market changes during construction.

For investors seeking capital growth, focus on established, scarce properties in proven locations rather than new developments unless they're in highly constrained, desirable locations with genuine supply limitations.

It's something we develop in our Australia property pack.

What's the level of competition from other buyers right now, and how quickly are properties selling?

Buyer activity is rising significantly, with median days on market recently dropping to 36 days from 51 days earlier in the year.

This faster property turnover signals higher demand and more robust competition among buyers. Listings are down while more buyers seek fewer available properties, creating a competitive buying environment.

The combination of improved buyer sentiment, better affordability due to interest rate cuts, and limited stock has shifted the market decisively in favor of sellers. Properties in desirable locations are selling quickly, often with multiple interested parties.

Buyers need to be prepared to move fast and have their financing pre-approved to compete effectively in this tightening market environment.

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.

What budget ranges offer the best value for money depending on whether you plan to live in the property, rent it out, or resell it?

Below $600,000 offers the best value for rental-focused investors, particularly units in outer and middle-ring suburbs like West Footscray, Kensington, and Craigieburn.

The $600,000-$900,000 range provides a mix of townhouses and smaller houses in rising suburbs, ideal for investors seeking both rental returns and future resale potential. This budget allows access to emerging growth areas with good infrastructure.

Above $900,000 targets established family houses in top-tier suburbs, optimal for long-term capital growth and owner-occupiers. These properties typically offer the strongest appreciation potential over 5-10 year periods.

For pure rental income, focus on the lower budget ranges in high-demand areas. For capital growth, invest in the higher ranges in established suburbs. For balanced returns, the middle range offers optimal diversification.

Which property types and areas are best suited if your goal is long-term capital growth versus stable rental income?

For long-term capital growth, target established houses and townhouses in middle and inner suburbs including Blackburn, Flemington, Kensington, and other family-friendly, infrastructure-rich areas.

1. **Capital Growth Strategy:** - Established houses in proven suburbs - Areas with tight supply constraints - Locations with strong owner-occupier appeal - Suburbs with infrastructure development - Properties with scarcity value2. **Rental Income Strategy:** - Modern units in high-demand zones - Areas near universities and transport - Locations with tight vacancy rates - Affordable suburbs with strong rental demand - Properties appealing to quality tenants3. **Areas to Avoid:** - Off-the-plan developments in oversupplied areas - Generic high-rise apartment complexes - New estates without established amenities - Areas with excessive future supply pipeline - Properties without unique locational advantages

The key is matching your investment strategy to property characteristics - scarcity and owner-occupier appeal for growth, convenience and affordability for rental income.

If you buy now, how should you position yourself in terms of location, property type, and budget to maximize your outcome whether for living, renting out, or reselling?

Prioritize established, well-connected suburbs with strong local economies, tight supply, and infrastructure growth for optimal positioning.

Choose family-oriented houses and townhouses for capital growth potential, or modern, well-located units for rental yield and income generation. The property type should align directly with your primary investment objective.

Budget allocation should reflect your intent: below median prices for pure rental yield focus, above median for strong growth and lifestyle benefits, or balanced approach for hybrid investment outcomes.

Focus on properties with scarcity, quality, and strong owner-occupier appeal while avoiding high-rise, mass-market developments unless they're deeply discounted or strategically positioned in supply-constrained areas.

It's something we develop in our Australia property pack.

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.

Sources

1. Metropole - Melbourne Housing Market Update
2. RealEstate.com.au - Melbourne House Prices News
3. Property Update - House Prices Australia 10 Years
4. OpenAgent - Melbourne Property Market
5. Property Update - Property Investment Melbourne
6. InvestorKit - Melbourne Property Market Guide
7. Your Mortgage - Median House Prices Australia
8. Mitchell Torre - August 2025 Market Update