Melbourne property market data, trends, forecasts

Melbourne property market news

After a historic boom in 2021 which saw median Melbourne property prices surge by more than +17 per cent, 2022 ended up being a turbulent year for the Melbourne property market. Home values fell -9.6 per cent from the February 2022 peak according to CoreLogic data, but momentum has shifted significantly in 2023 with October bringing another month of growth.

Melbourne property prices - October 2023

The turnaround has been driven by a prolonged shortage of listings which have remained low since the muted 2022 spring selling season. Sellers have displayed hesitancy in the rising interest rate environment, and that shortage has helped to stimulate price growth once again. 

October new listings were up +19.7 per cent on the same month in 2022, though, so sellers have been returning to the market. Total listings +7.5 per cent higher, suggesting buyers are still absorbing the new stock. Melbourne's median days on market (DOM) was 28, down from 31 days the previous year. Sales volumes are down -15.0 per cent year on year, although there are signs that buyers are starting to return to the market in force. 

Melbourne house prices

The house-led boom of 2021 saw Melbourne house prices shoot up to record highs before hitting their peak in February 2022 and then falling over the following 12 months. Solid growth has been returning since that point, though. 

Melbourne house prices - October 2023

Melbourne's median house price notched up another +0.4 per cent in October to just over $937,000. As a result, quarterly movement now sits at +1.0 per cent, while annual movement has returned to a positive range at +2.2 per cent. We will now wait to see whether the upward momentum can hold up in the face of rising listings over the warmer months.

Top 5 Melbourne suburbs for first home buyers - houses

The pace of correction slowed in February as Melbourne's median house price dropped by -0.5 per cent to just under $900,000, bringing quarterly losses to -3.0 per cent. Annual declines are now down into the double digits, and with further rate increases expected in the coming months, Melbourne houses may still be a way above the market bottom.

Top Melbourne suburbs under $900,000 house price

Melbourne unit prices

While house prices surged in 2021, Melbourne's median unit price increased at a softer rate as buyers followed a 'race for space' mentality and looked for larger homes or regional escapes. The positive is that Melbourne unit owners since experienced smaller drops in value as the downturn unfolded, and unit prices have held strong throughout 2023. 

Melbourne unit prices - October 2023

The median unit price in Melbourne increased by another +0.7 per cent in October to sit just over $615,000. Over the past three months, prices are up +1.5 per cent, while annual change returned to growth at +2.8 per cent.

An increase in demand for units due to upcoming immigration and renewed interest from first home buyers looking for a cheaper alternative could continue to support unit prices. 

Top 5 Melbourne suburbs for first home buyers - units

Units offer better affordability for first home buyers in Melbourne, although median prices are still substantial. Here are some of our top picks for Melbourne suburbs where you can buy below the median unit price. 

Top Melbourne suburbs under $600,000 unit price

Melbourne property market forecast 2023

Following the property boom of 2021 that saw median property prices soar all across Australia, a market correction to follow was almost inevitable. Now that prices are on the rise again, can the momentum continue or will high interest rates and poor affordability cut the run short?  

NAB's latest Melbourne house price forecast has improved considerably, projecting Victorian capital dwellings gaining +4.7 per cent in 2023 with a further +5.5 per cent to come in 2024. 

Westpac's Melbourne real estate forecast saw a substantial change too, with prices now expected to rise by +3.0 per cent in the new year. CBA and ANZ both fall within a similar range.

Big four banks' Melbourne home price forecasts 2023-24

Whether or not growth can be sustained still largely depends on the supply and demand dynamic over the rest of the year. Interest rates had extensive impacts on the market and, while there was a period of stability, there remains a question mark around where the peak will be found. 

Currently, the RBA sits at 4.35 per cent, a long way up from the emergency-level 0.1 per cent rate borrowers were enjoying until May 2022. The banks mostly expect there will be no further hikes, with rate cuts to begin in the later stages of 2024 or early in 2025.

Big four banks' cash rate forecast 2023-24

Melbourne apartment prices held onto their value better than houses throughout the downturn and are outperforming during this upswing phase. That dynamic could continue for several key reasons. 

Firstly, the property boom of 2021 was house-led. Affordability has reached critical levels for the house market, and with house prices gaining a substantial amount more than units, they also have further to correct. 

Units are also expected to appeal further to incoming investors as immigration is set to ramp up significantly (around 300,000 new entrants are expected in 2023) bringing additional demand to the rental market.

What are industry experts saying?

Michael Yardney - Director of Metropole Property Strategists

"In contrast to Sydney's quick recovery, Melbourne has seen a slower, more steady price growth trajectory. This isn't necessarily a bad thing, especially as Melbourne has performed strongly in the long term when compared to other capital cities.

Across sub–regions, Melbourne's Inner and Outer East are outperforming marginally while the North West and West are seeing prices stabilise rather than rise.

Conditions are notably softer outside the capital, prices only stabilising for the Mornington Peninsula but declines continuing for Geelong and showing few signs of abating for Bendigo."

George Bougias - Head of Research at Oliver Hume

"Melbourne's population is forecast to grow almost 20% over the next decade, creating a significant demand for housing. With increased demand, we will likely see continued strong price growth, which would be great news for investors.

With increasing numbers of people able to work from home, the focus on lifestyle has never been greater. Melbourne has long been regarded as Australia's cultural capital, and the city's vibrant, diverse culture focused on sport, dining, and events is one of the reasons why so many people are moving here."

Melbourne house prices graphs and charts

The latest chart pack from CoreLogic clearly demonstrates the rapid acceleration and subsequent deceleration of the Melbourne property market over the past two years. Now in 2023 the worm has turned once more.

The upturn during the 2021 boom was one of the most aggressive and significant periods of growth in Australian history. The downturn that's followed has also proved to be a historic one, though, but growth has come back with strength in 2023. 

Zooming out and looking at the wider context over the past 30 years, though, prices in Melbourne have seen incredibly strong increases. The below chart shows Melbourne house prices soaring well beyond every capital city save for Sydney, particularly since around 2013.

When taken into the perspective of even the past few years, Melbourne homeowners have experienced huge gains to the value of their properties.

Selling Melbourne property

According to Domain's latest figures, auction clearance rates in Melbourne have been holding strong since the market recovery, regularly sitting at or above 65 per cent. Melbourne Days On Market (DOM) has also stabilised and is currently below the average national level.

Melbourne property investment

The Melbourne property market has been turbulent for investors throughout the pandemic, however prices have lowered, rental vacancies are still around record lows, and asking rents continue to surge with further demand expected due to increased immigration. Considering these factors, it could be a positive time for Melbourne property investors. Many are opting out of the market, though, as rising mortgage commitments create pressure.

Top 5 suburbs for Melbourne investors

The latest BuyersBuyers Investor Special Report detailed some of the top suburbs where Melbourne investors could find strong future potential. 

The report explains that "prior to the pandemic, Melbourne had become a global city, and its population growth was the strongest in Australia due to strong immigration. 

"This trend is likely to resume in 2023, and Melbourne is expected to be the largest capital city of Australia over the coming decade."

Top suburbs for investors to buy units in Melbourne

The report noted that "family-suitable apartments in small unit blocks in popular areas, where houses are out of reach, have also delivered solid capital growth and a healthy rental return," adding that "units have underperformed houses significantly in Melbourne over the past decade, and there are some opportunities for contrarian investors to pick up a bargain."

Looking to invest in Melbourne property? 

• Check out our list of best suburbs to invest in Melbourne for 2023
• Get stuck into some expert advice on where to find the top 10 suburb picks for Australian investors
• Discover the Melbourne suburbs with the highest rental yield
• On a budget? Here are the top 10 cheapest suburbs to buy in Melbourne