Author: Damien Stone and Andrew Downie
In 2024 Melbourne’s residential property market growth lagged behind that of other capital cities, extending the downturn it had experienced since 2022.
That story has changed significantly over the past year with the market’s rebound. Investor and owner occupier activity levels are now demonstrating a renewed confidence in Melbourne’s residential property market.
According to Cotality’s January monthly report, Melbourne’s housing values are rising (up 4.8% over 12 months) and are currently just -0.9% below the March 2022 record high.
Melbourne’s rental rates have risen 2.9% over the past 12 months. While this statistic was lower than the national average rate of growth (5.2%), it reflects the ongoing high levels of rental rates in Victoria’s capital. Adding to the appeal for investors, gross rental yields remained stable at 3.6%.
Demand for Melbourne’s residential properties is unlikely to ease soon, as the ABS’s most recent projections indicate Victoria's population of 6.6 million will increase by 0.7–1.5% per year, which is higher than the average Australian annual growth rate. The ABS predicts Victoria will have a population of 9.3–13.8 million by 2071.
Part of the story of Melbourne’s rebounding market is in the demand for lower quartile properties. A recent NAB Melbourne Property Market Insights report included analysis for the strata market, which showed the segment was up 10.1% on a comparison with the 5-year average.
Demand for these products is expected to rise following the Australian Government’s recent expansion of the 5% Deposit Scheme, which is helping make home ownership an affordable and desirable option for many – particularly in the context of the rising costs of rent. This trend was foreshadowed by a 1.3% rise in demand for Melbourne’s lowest 25% of property values in the last quarter.
Further reflecting the heightened entry-level demand, Cotality’s most recent Home Value Index showed more affordable local government areas like Frankston, Brimbank, Kingston, Tullamarine-Broadmeadows, Sunbury and Dandenong topped the highest 12-month value growth list for the year.
Melbourne’s housing stock remains tight despite the Cotality year-on-year analysis showing Melbourne housing sales were up 10.3%. The drop in median days on market over the year from 36 in December 2024 to 29 in December 2025 also signals Melbourne has entered a stable market with a lean towards the sellers.
In part the constrained supply is due to construction feasibility challenges, which – combined with Victoria’s land tax regime, including the Vacant Residential Land Tax impost – are particularly impacting built form developers.
Feasibility issues are also being caused by planning permit delays, which in some municipalities can take up to a year, as project time delays increase risks around construction costs, market values and end values.
To help ease Melbourne’s rental shortage, the Victorian Government has been fast-tracking approvals at the state rather than local council level for build-to-rent developments, such as the 476-apartment complex at 25 River Boulevard in the Victoria Gardens Precinct. According to a June 2025 government announcement, there are now 18,200 build-to-rent apartments under construction or with planning approvals in Melbourne – more than half of the national total.
Melbourne’s residential market is diverse and there can be a significant difference in valuation growth within sub-market categories based on location.
For example, valuations are coming off some high-end apartments in affluent suburbs with higher levels of supply like Brighton and Toorak, yet are rising in Hawthorn. In some cases, end valuations have come in at up to 20% below the off-the-plan contract price and purchasers have walked away from their deposits to minimise their loss.
Given Melbourne’s sprawling footprint, ongoing work from home practices have also influenced market trends. Many families are now preferring to buy homes in Melbourne’s middle and outer suburbs, rather than move into large apartments in inner or middle suburbs.
With a rising population, steady valuation growth and ongoing supply concerns, Melbourne’s residential property market shows no signs of slowing. KPMG’s June 2025 Residential Property Market Outlook echoes this analysis, as it forecasts Melbourne’s house and unit values will rise 6.6% and 7.1% respectively by the end of 2026 – outperforming all other cities.
damien.stone@opteonsolutions.com
andrew.downie@opteonsolutions.com
DISCLAIMER
This article is produced by Opteon Property Group Pty Ltd. It is intended to provide general information in summary form on valuation related topics, current at the time of first publication. The contents do not constitute advice and should not be relied upon as such. Formal advice should be sought in particular matters. Opteon’s valuers are qualified, experienced and certified to provide market value valuations of your property. Opteon does not provide accounting, specialist tax or financial advice.
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