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

Melbourne’s housing market ended 2024 on a weaker note, with a -3.0% annual decline in dwelling values, marking one of the sharper downturns among Australian capitals. The city’s median home value stood at $774,093 by December 2024. This reflects the ongoing impact of reduced affordability and weakened demand.

Melbourne Property Price Growth

The annual decline of -3.0% represents a significant contraction, driven primarily by sluggish conditions in both the housing and unit sectors. The city’s quarterly value change was -1.8%, highlighting the continuing downward trend in prices during the latter part of the year.

CoreLogic Home Value Index

CoreLogic Home Value Index, Released on 1st January 2025

Melbourne Property Market Trends

• Affordability Constraints: Persistent affordability challenges and reduced borrowing capacity due to high interest rates have significantly affected Melbourne’s market.
• Supply-Demand Imbalance: Increased supply and lower buyer urgency have further contributed to price declines.
• Rental Market: Melbourne’s gross rental yield for units rose by 37 basis points to 4.8%, signaling slightly improved conditions for investors, though overall rental growth remained subdued.

Change in dwelling values over key time periods

Melbourne Property Market Forecast

The outlook for Melbourne in 2025 suggests continued soft conditions, with potential stabilization as interest rates are expected to decrease. Factors influencing the market include:

• Anticipated reductions in the cash rate, possibly increasing borrowing capacity.
• Slower net overseas migration, potentially easing pressure on demand.
• A shortage of newly built housing, likely sustaining some level of price floor over time.

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 housing market faces ongoing challenges, with declining values reflecting affordability pressures and shifting market dynamics. While modest improvements in affordability and demand are expected in 2025, significant growth recovery remains unlikely in the short term​.

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