Melbourne Property Market – Prices, Trends, Forecast [May 2025]

Melbourne’s housing market showed mild growth in April 2025, with dwelling values rising 0.2% for the month and 1.0% over the quarter. However, the broader picture reflects ongoing softness, as annual dwelling values declined by -2.2%, and remain 5.4% below the market’s peak in March 2022. This places Melbourne among the weaker performing capital city markets in year-on-year terms.

The current median value of a Melbourne dwelling is $786,158, with houses at $934,500 and units at $610,327.

Melbourne Property Price Growth

• Monthly growth: Dwelling values increased by 0.2% in April, with houses up 0.1% and units rising by 0.4%.
• Quarterly growth: Values grew 1.0% across both housing types, suggesting some regained momentum post-February rate cut.
• Annual change: Down -2.2% overall, with houses falling -2.0% and units more sharply at -2.6%.
• Compared to other capitals, Melbourne lags considerably. For context, Perth and Adelaide posted double-digit annual gains.

CoreLogic Home Value Index

CoreLogic Home Value Index, Released on 1st May 2025

Melbourne Property Market Trends

Sentiment and Buyer Activity

• Despite value growth since February, the pace has moderated as buyer sentiment remains cautious.
• Melbourne was one of the cities most reactive to February’s rate cut, which sparked the current uplift in values.

Rental Market

• Annual rental growth slowed sharply from 9.4% to 2.0%, reflecting a broader cooling in tenant demand or stabilisation in supply.
• Gross rental yields in Melbourne stand at 3.7%, relatively low compared to cities like Perth (5.3%) or Darwin (6.6%), signaling tighter investor returns.

Suburb Performance

The strongest-performing Melbourne subregions include:

• Tullamarine – Broadmeadows (North West): +1.9% annual growth
• Frankston (Mornington Peninsula): +1.8%
• Hobsons Bay (West): +1.7%

Most other subregions, including Melton, Whittlesea, and parts of Casey, recorded 0% or marginal growth, indicating limited uplift across broader Melbourne.

Change in dwelling values over key time periods

Change in dwelling values over key time periods

Melbourne Property Market Forecast

The outlook for Melbourne is cautiously optimistic:

• Stimulus measures from both major political parties are expected to support first-home buyers post-election.
• Rate cuts, while helping demand, may also encourage more listings, which could moderate upward pressure on prices.
• Melbourne’s sensitivity to monetary policy—particularly in upper quartile markets—may mean it responds more to additional easing than other cities.
• However, structural issues persist, including:
  • Stretched affordability: Melbourne has one of the highest dwelling-to-income ratios nationally.
  • Construction constraints: Housing starts remain 16.5% below the decade average, tightening future supply.

The Reserve Bank of Australia’s ongoing adjustments to interest rates will likely play a crucial role in shaping market dynamics, as higher borrowing costs limit purchasing power for many buyers.

Here are some of the most recent forecasts by the big-4 banks in Australia:

• ANZ predicts a 5-6% increase in capital city property prices in 2024, with Brisbane expected to see the highest rise at 9-10%, Perth property values could go up by 1-11%, Sydney by 4-5%, and Melbourne prices by 2-3%.
• CBA forecasts a 5% rise in capital city prices, with some variations: Brisbane is anticipated to grow by 6%, Melbourne and Perth by 5%, Sydney by 4%, and Adelaide by 1%.
• NAB projects a 5.4% average increase across the capitals, with Brisbane expected to see a 6.5% rise, Perth and Adelaide by 6.2%, Melbourne by 5.5%, Sydney by 5%, and Hobart remaining flat.
• Westpac expects a 6% growth across the combined capitals, with Perth leading at 10%, followed by Brisbane at 8%, Sydney at 6%, Adelaide at 4%, and Melbourne at 3%

Oxford Economics recently released property forecasts predicting where house prices will be in three years.

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Conclusion for Homeowners

Melbourne’s property market has seen modest recovery signs through early 2025, helped by rate cuts and pre-election sentiment. Yet, with annual values still in negative territory, the city continues to trail other capitals. Rental growth has also markedly slowed, potentially limiting investor enthusiasm.

Going forward, Melbourne’s recovery hinges on stimulus implementation, rate policy, and supply dynamics. While some momentum has returned, a full recovery to previous peaks remains a longer-term prospect.

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