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

Melbourne’s housing market in 2025 reflects a market navigating both resilience and recovery. It was one of only two capital cities (alongside Canberra) to record an annual decline in dwelling values, down 1.2% year-on-year. This softening is largely attributed to the lingering impact of high interest rates and cost-of-living pressures.

Despite this, momentum has started to re-emerge. Melbourne posted a modest 0.4% rise in May, showing signs of a shift toward renewed stability.

Melbourne Property Price Growth

Over the past 12 months, Melbourne saw a -1.2% annual change in dwelling values—the weakest performance among capital cities. However, the past three-month growth of 1.2% signals a tentative turnaround. This change is consistent with national trends where home value growth is broadening across markets.

In terms of rental prices, growth has also slowed. Annual rental increases were 1.4% for houses and 1.6% for units, placing Melbourne among the softest rental markets nationally.

CoreLogic Home Value Index

CoreLogic Home Value Index, Released on 2nd June 2025

Melbourne Property Market Trends

Melbourne’s price weakness is notable considering its historical resilience. The data show:

• A total return of 1.2% over the past year, factoring in rental income and capital change.
• Median dwelling value at $791,303 as of May 2025.
• Gross rental yields holding at 3.7%, one of the lowest among capital cities.

Melbourne’s performance is being shaped by affordability constraints, reduced migration-driven demand, and a moderation in investor activity. On a suburb level, no Greater Melbourne SA3 area cracked the national top 10 for annual value growth, with Frankston leading locally at a 2.7% annual rise, followed by Tullamarine – Broadmeadows (2.6%).

Change in dwelling values over key time periods

Melbourne Property Market Forecast

The market outlook suggests Melbourne may slowly regain momentum, supported by:

• Likely interest rate cuts in the second half of 2025.
• Growing political and economic stability following the federal election.
• A continued undersupply of new housing stock, which could add upward pressure on prices.

However, downside risks remain. Housing affordability is stretched, and lending conditions remain tight. Migration has yet to return to pre-COVID peaks, and rental markets show signs of flattening.

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 is showing early signs of recovery after a year of subdued growth. While still underperforming compared to other capitals, the modest gains in recent months and the potential for rate cuts position the city for gradual improvement.

The market remains cautious but not stagnant. Melbourne could be poised for a more balanced trajectory in the second half of 2025—albeit without the exuberance seen in some other capitals.

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