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Melbourne Property Market & House Prices

Melbourne property market is one of the most talked about in the world and for good reason. It is one of the most active markets with a constant flow of new properties being released for sale.

Like all capital cities, the market is made up of two distinct areas: the city centre and the suburbs. The city centre is comprised of high-rise apartments and is popular with investors and young professionals. The suburbs are made up of family homes and are popular with people and families who want to live in a quieter area.

The most popular areas for property investors are the inner city units and houses around the outer circle suburbs. The Melbourne property market is on the rise with many experts tipping it to be one of the strongest performing markets in the country this decade. The city’s population growth, stable economy and limited supply of properties are all driving forces behind the emerging market conditions.

Melbourne Real Estate Market

The Melbourne real estate market is one of the most popular and in-demand markets in the world. The city is known for its diverse and lively culture, as well as its consistently strong economy. This has helped to make Melbourne one of the most expensive real estate markets in the world.

Melbourne is one of the most populous cities in Australia, and it is also one of the most prosperous. The city has a strong economy, with a number of major businesses and industries located there. This has helped to make Melbourne one of the most livable cities in the world, and has also created a lot of demand for housing.

The city is also popular with investors, who see it as a safe and stable place to invest their money. This has helped to drive up prices and make the market even more competitive.

If you’re thinking of investing in Melbourne, it’s important to do your research first. The market here is less dense than on the East Coast of the country, so there’s a lot of opportunity for investors, however data-driven market due diligence is a must before moving on with property search.

The heatmap above showcases the annual house price changes in Melbourne. Darker blues represent higher growth, while lighter blues signify lower growth. This data is refreshed each month for the most current analysis.

Get an different perspective with the Lower Risk view, which presents areas with a lower risk as more vivid. This risk score ranges from 1 – 100 and is determined by a variety of risk factors, such as statistical data, market conditions, and environmental exposures. Learn more about HtAG’s property market risk criteria here.

Take your research to the next level by signing up for our Professional Plan and gaining access to specialised features like suburb-level heatmaps, capital growth metrics, and cashflow rankings.

Snapshot of Key Metrics & Market Comparison Table

We start with a snapshot of the Melbourne market that provides an overview of key real estate metrics. The data in this snapshot illustrates typical price, median rent and gross yield metrics for the territory.

Use the Houses/Units toggle buttons below to view the market snapshot for different property types in Melbourne. Houses are free standing houses (excl. townhouses and villas). Units are apartments, studios, flats, units (excl. unit blocks).

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Rent 

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You are able to drill down to LGA-level data and charts which visualise these 3 key metrics as well as other important indicators in the table that follows.

Enable additional columns in the table by clicking on the buttons underneath it. Toggle between LGA and Suburb views in the table’s navigation bar. The data in the table represents key real estate metrics as of the current quarter and is updated on a monthly basis i.e. 3 times per quarter.

Clicking on an LGA or Suburb links in the table will take you to the relevant LGA page where you can drill-down to the next level of data.

Melbourne House Prices

The house prices in Melbourne have seen some peaks and throughs over the past 10 years. Melbourne units saw a continuous steady increase with no notable peaks. The unit prices are likely to continue steady growth seen in the past years.

The interactive chart below shows typical price for both houses and units as well as the sales volume per quarter. Toggle additional views of prices per number of bedrooms by clicking on BR2, BR3 etc underneath the graph. You can also drill down to LGA charts using the dropdown in the chart navigation bar.

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The Melbourne housing market is becoming increasingly unaffordable for many buyers. In order to purchase a typical house in Melbourne, buyers would need to earn more than double the median household income.

Despite the high prices, Melbourne remains a popular destination for property investors. The latest figures from the Australian Bureau of Statistics (ABS) show that Melbourne is the second most popular city in Australia for investment housing, after Sydney.

Melbourne Rental Prices

Unlike sale prices, median weekly rent in Melbourne do no exhibit pronounced peaks in the recent years. There is a sign that rent prices for houses have stabilised at $529 PW in the short term.

Rent prices for units follow the same patterns as houses, plateauing at around $404PW for the past several years.

Use the interactive chart below to explore the Melbourne rental prices in detail.

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As Melbourne continues to grow in popularity as a destination city, the demand for rental properties continues to rise. This has resulted in a steady increase in rental prices over the years. These increases are significantly higher than the national median rent changes over the same period.

The reason for the increase is due to the strong demand for rentals in Melbourne, which is being driven by the city’s booming economy. In addition, the number of rental properties available in Melbourne is declining, as more and more people are choosing to buy their own homes.

While the rental market is becoming more and more competitive, it’s still a great option for people who don’t want to buy their own home. Melbourne is a great city to live in, with plenty of job and entertainment options, and the rental prices are still much lower than those in Sydney.

Gross Yield on Investment Properties in Melbourne

Gross yield is the percentage of the purchase price that the investor receives in income each year. In Melbourne, gross yields for property investment (houses) ranges from 1.6% to 3.0% depending on the location. Lower priced suburbs typically offer higher yields. However, there are exceptions to this rule.

At a high level Gross Yield in Melbourne reached its’ peak of 3.4% in 2012-2013 as house prices were more affordable than today. It has been on a downtrend ever since with a notable bump around 2019-2020 due to lockdowns. Explore the chart below to visualise the gross yield trends for Melbourne LGAs in detail.

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The gross yield on Melbourne property investment has changed a lot over the years. Back in the early 1990s, the average gross yield on a Melbourne property investment was around 10%.

This decrease is due to a number of factors, including the increasing cost of property in Melbourne, and the increasing popularity of property investment among Australians. As a result, investors are now being forced to offer higher rental yields in order to attract tenants.

So what does this mean for Melbourne property investors?

If you are looking for a high yield property, then you may need to look outside of the city centre. Conversely, if you are looking for a lower yield property, then you may be able to find something within the city centre.

While the decrease in gross yields is disappointing, it is important to remember that Melbourne is still one of the most affordable major cities in the world. And, as the market continues to grow, investors can still expect to see capital growth of around 5-10% per annum.

Melbourne Property Type Demand Profile

The real estate market in Melbourne is extremely diverse, with something to offer for everyone. From luxury waterfront apartments to historic homes in the city centre, there is something for everyone in Melbourne.

Additionally, the city is constantly growing and expanding, meaning that there are always new and exciting properties being developed.

As far as residential property market is concerned, the most in-demand Melbourne real estate are 3 and 4 bedroom houses, followed by 2 bedroom units. The units are dominant in Inner Melbourne, whereas outer LGAs are more urban and have 3 and 4 bedroom house preferences.

Use the chart below to understand which property types have the highest demand in Melbourne real estate market.

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Melbourne Buy & Rent Search Index

According to Google Trends, the keyword “houses for sale in Melbourne” has been searched for more times than any other city in Australia. This is unsurprising, given Melbourne’s booming property market.

There is a high demand for houses in Melbourne, as the city is growing rapidly. In the past year, the number of people searching for houses in Melbourne has increased significantly.

The chart below illustrates the trends for “buy” and “rent” online searches in Melbourne. You’ll notice that there are more searches for properties listed for sale than rental properties. The searches peaked towards the end for 2020 and have since returned to average historical levels.

The black lines on the chart highlight the search index, which is calculated by apportioning the LGA “buy” or “rent” searches to the state average.

The overall search index for Melbourne is calculated as an average of all LGA indexes. It has historically hovered between 6.0 and 7.0 for houses which is higher than the index in less populated and economically developed areas in the state.

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What could be the reason behind this high search interest? There are a few possible explanations.

Firstly, Melbourne is a desirable city to live in. It’s a vibrant and multicultural metropolis with plenty of job and education opportunities. It’s also home to some of the most beautiful natural scenery in the country.

Secondly, Melbourne’s property market is relatively affordable when compared to other global cities such as Sydney and London. In fact, the city has been named one of the most liveable (and affordable) major cities in the world by The Economist.

And finally, the Australian dollar is relatively weak at the moment, making it a more affordable destination for overseas buyers.

Melbourne Property Market Growth Rate Cycles

It’s no secret that Melbourne’s property market goes through cycles. As with any market, prices and demand will rise and fall at different times, depending on a range of factors.

The Melbourne property market has entered the growth phase in early 2020. The market has been performing well since then, with house prices and rents increasing. The market is expected to continue to grow in the short-term.

The chart below illustrates the year on year changes in Melbourne property prices. We can see that the Melbourne housing market was in decline between 2018 and 2019, with house prices in some LGAs dropping by as much as 5%.

A similar pattern can be observed for units with trough in some LGAs reaching negative 3% in 2019.

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Confidence: High, Medium, Low

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It’s important to note that this growth is not uniform across all areas of Melbourne. The inner and middle LGAs are performing the best, with prices on the upper range of the chart. The outer LGAs, on the other hand, have seen more modest growth of around 3%.

Remember that growth rate cycles are not set in stone. They can change quickly and unexpectedly, so it’s always best to speak to a property expert or perform detailed assessment before making any major decisions. Make sure you are confident that the area you are buying in will continue to grow in value over the next few years.

Ratio of Renters to Owners in Melbourne LGAs

The importance of having more owners than renters in a property market is that it gives people a sense of stability. Owners are incentivised to maintain their property and contribute to the community, increasing the appeal of the neighbourhood as a whole.

The Melbourne property market is a tale of two halves, with renters outnumbering owners in the inner city and owners significantly outnumbering renters in the outer suburbs.

The high number of renters in Melbourne inner suburbs is partly due to the high cost of housing, which forces many people to rent.

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When the majority of people in a community are renters, they are less likely to invest in the community. This is because they are not likely to be there for the long run.

As a rule of thumb, there should be no more than 45% renters in an area for it to be considered to have a good investment potential.

In Melbourne, the ratio of renters to owners is also skewed towards owners in the City of Casey and Wyndham, in Melbourne’s outer south-east, where there are more than four times as many owners as renters.

Ratio of Units to Houses in Melbourne

One thing that is clear is that the market is changing, with the ratio of units to houses slowly tipping in favour of units. This is particularly noticeable in the inner city and inner suburbs, where there is a higher concentration of apartments.

At the moment, the ratio of units to houses in Melbourne is around 33:67, but this is likely to change over time. If you’re thinking of investing in the Melbourne property market, it’s important to keep this trend in mind and consider whether an apartment or a house is the right investment for you.

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While the number of houses sold in Melbourne has increased modestly over the years, the number of units sold has increased by about a third.

It is important to have more houses than apartments (units) in a property market stock because it creates more diversity in terms of what property types are available to buy or rent.

As apartments within a building typically have similar designs it allows for more competition between landlords, which can drag the prices down.

As a rule of thumb the unit to house ration should be below 50%, but the lower the better. Markets with large apartment stock reduce the appeal of the housing stock in the market.

In Melbourne, the trend towards apartment living was being driven by a number of factors, including the increased availability of units, falling prices for apartments and the growing popularity of inner-city living.

Melbourne Property Market Socio-Economics

There is no one-size-fits-all answer to the question of Melbourne’s socio-economic status. Depending on which parts of the city you look at, the level of wealth and poverty can vary greatly.

Generally speaking, Melbourne is a prosperous city, with a high level of economic activity and a relatively low level of unemployment. However, there are also pockets of poverty, especially in the inner city and in the suburbs that have been hit hardest by the closure of businesses during the lockdowns.

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People in the higher socio-economic status are more likely to be able to afford to purchase and rent property in the area. This helps to increase demand for rental properties in the market and frequently attracts high-quality long-term tenants.

IRSAD stands for the Index of Relative Socio-economic Advantage and Disadvantage. This metric provides a high level view of the socio-economic status of a property market.

There is a wide range of incomes within Inner Melbourne, from the high-income suburbs of Toorak and South Yarra, to the low-income suburbs of Broadmeadows and Dandenong.

Melbourne is one of the most socioeconomically diverse areas in Australia, with a mix of high, middle and low income suburbs. This makes Inner Melbourne an interesting place to live and work, as it offers a wide range of opportunities and experiences.

Conclusion

The Melbourne property market is one of the most active and in-demand markets in the world. It is made up of two distinct areas: the city centre and the suburbs, that tend to attract investors and young professionals and families respectively.

Despite affordability issues due to the booming economy, Melbourne remains a desirable city to live in with plenty of job and entertainment options. There is a high demand for 3 and 4 bedroom houses in the market, with the city’s population growth and limited supply of properties driving up prices.

Rental prices are also increasing, but investors and buyers must stay confident and be aware of potential market changes.

Doing your due diligence before investing in real estate is important. With the tools from HtAG Analytics, you can swiftly analyse the entirety of the property market across Australia to gain a better understanding of the risk, capital growth, and potential cashflow. Our Relative Composite Score (RCS™) integrates traditional market data points into a single score, saving you time and energy.

With fresh updates every month, this real-time data allows users to gain a trustable and complete overview of the market. Make sure to take advantage of this powerful tool now by subscribing to have full access using one of the options below.

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More About Melbourne Property Market

What infrastructure projects are currently planned for Melbourne?


There are a number of infrastructure projects currently planned for Melbourne, including the West Gate Tunnel, the Melbourne Metro Tunnel, and the Airport Rail Link.

The Melbourne Metro Rail project is a planned 9km railway line in Melbourne, Victoria, Australia. The line will connect the city’s north and south via the CBD with five new underground stations. The project is currently in planning stages and is expected to be completed by 2026.

You can find out more about current and planned projects by visiting Office of Project Victoria website.

2 thoughts on “Melbourne Property Market Forecasts”

  1. Are We Seeing a Move Away from the Melbourne CBD?

    Melbourne house prices have had one of the most usual periods we have ever seen thanks to the second lockdown period across Victoria. The second wave of COVID has caused a dramatic fall in the number of transactions we’ve been seeing, with buyers not able to access properties and auction activity ground to a halt.

    Longer-term, we also know that Melbourne is coming out of a period where it had seen incredibly strong growth in house prices. Values had been trending higher since 2007 and that growth only finally started to slow in 2017.

    However, as we look towards the forecasts for what will come over the next few years, we might already be starting to see a bit of a change in trend, with more interest in semi-regional areas than we have ever seen before.

    That is likely to show through with a number of LGAs located well outside of the Melbourne inner-ring areas, potentially set to be strong performers in the next two years.

    With lockdowns now set to ease and businesses across the state hoping to reopen, there is likely going to be plenty of pent up demand from buyers and with listings still low, that could flow through to a number of areas performing strongly in the months ahead.

    Melbourne Prices in 2020

    Despite the COVID enforced lockdowns and the Victorian economy grinding to a halt, property prices have remained resilient.This is clear by the fact that all the LGAs within and surrounding Melbourne area have seen levels of growth that range between -3.6% and +1.6%. The areas that have been most impacted have been the inner-city and CBD areas that have a large reliance on students and the tourism industry.

    Over the last 12 months on a suburb level, we have seen some very strong performing suburbs, however, it’s important to note that transactions have been limited.

    Balnarring Beach 3926 +16.66%

    Balnarring Beach has seen incredibly strong price growth over the last 12 months, however, it must be noted this is on low transaction numbers. That said, the trend here is clear at the moment, that suburbs that are located away from the CBD are becoming more appealing in the short-term. Balnarring Beach has grown in value by 16.66%, and HtAG has assessed this suburb as medium confidence.This is clearly a higher-end suburb with the median value currently $2.13 million. While the suburb has seen a long period of growth, the growth rate is likely to fall from the highs we’ve seen over the past 12 months.The data is assessed as medium confidence due to the low number of sales in the suburb. To access the latest HtAG forecasts with high confidence, subscribe to one of our plans.

    Don Valley 3139 +13.32%

    Continuing with the same trend we’ve been seeing, Don Valley was another strong performer over the past 12 months growing at 13.32%. Don Valley is also located a long way from inner-city Melbourne and has a median price of $1.02 million, however, we have only seen low transaction volumes and as such the data is assessed as medium confidence. It appears that the high level of growth that we’ve seen is not going to last with the rate falling back to near-on flat levels in the coming 24 months. Again this is assessed as medium confidence based on low transaction volumes.

    Merricks North 3926 +11.74%

    Merricks North is another higher-priced suburb on the Mornington Peninsula where, the median house price has risen by 11.74% to $2.61 million with medium confidence, based on 1 sale. This is a suburb that is some distance from the city and is appealing to those with money to spend – particularly, those seeking a tree or sea change. In terms of the growth cycle, Merricks North is also at the peak of its cycle and will likely slow down in the coming 12 months according to HtAG forecasts, with a medium level of confidence. To see suburbs with strong growth potential with high confidence, subscribe to one of our plans.

    Melbourne’s Next Growth Suburbs

    Despite the overall Melbourne market appearing to be flat, there are still a number of areas that are set to see strong growth. Overwhelming we are seeing a trend here where there is a flight to quality, with a number of suburbs with median house prices above the $1 million range, expected to see strong growth. While some of these suburbs are away from the CBD, there are still options for those looking to buy closer to the city.

    Flinders 3929 +19.54% Forecast Growth

    Flinders in the Mornington Peninsula Shire looks like it is getting set for a strong 24 months, with growth of 19.54% predicted with medium confidence according to HtAG forecasts. This is another one of those suburbs with high median values, that is some distance from the inner-city. However, it also experiences low transaction volumes. Flinders has been a strong suburb for a long time and as we can see price growth is consistent and it’s predicted median values will increase to $2.78 million over the next two years. Flinders is a rising market as assessed by HtAG and could see near double-digit growth in both 2021 and 2022 and has seldom had a period of negative growth in the last decade.

    Flemington 3031 +16.16% Forecast Growth

    Flemington has been relatively flat in terms of price growth since the end of 2017, but that looks set to change with HtAG forecasting growth of 16.16% over the next two years. That should see the median value increase to $1.27 million and is assessed as medium confidence by HtAG. Flemington is assessed as being a rising market with medium confidence and as we can see, has not seen negative growth in the last 12 years.

    Box Hill 3128 +11.58% Forecast Growth

    Box Hill is another suburb that is around 15km from the CBD while still be assessable and popular. For that reason, Box Hill also has a long period of consistent growth and that trend looks like it is set to continue going forward. HtAG is predicting the median house price to increase by 11.58% to $1.98 million with medium confidence over the next 24 months. HtAG has assessed the Box Hill market as rising with medium confidence, which suggests it is a good option for both investors and homebuyers in the current market.

    Conclusion

    As we’ve seen, the Melbourne market has shown resilience over the past 6-12 months and largely been able to overcome the COVID enforced lockdowns.

    We are already starting to see a trend towards suburbs that are away from the CBD, but still within commuting distance. Similarly, there is still demand for high-quality properties above the median house price.

    While transactions have been low this year, there are still suburbs that are set to grow over the next 12-24 months.

  2. The Melbourne economy is performing quite well. The city has a low unemployment rate which is great for a stable property market. This is also encouraging more people to move to Melbourne.

    Notably, Melbourne’s core population is getting older. This is creating a demand for more housing options that cater to older people, such as retirement villages and aged care facilities. Thanks to a booming services industry and strong demand from foreign investors, the city’s GDP is expected to continue growing along the established trajectory. This is good news for Melbourne residents, who will see their wages and living standards continue to rise.

    The city’s dynamic business culture is a major draw for investors. Melbourne is home to a large number of innovative startups, and its well-educated workforce is highly sought after. In addition, the city’s infrastructure is among the best in the world, with a world-class transport system and a thriving arts and culture scene.

    All of this is helping to make Melbourne one of the most popular destinations for expatriates. The city’s strong economy and high standard of living are attracting talented workers from all over the globe. As a result, Melbourne’s international migration has been on the rise, but with some pause due to the recent border closures.

    The city’s economy is not without its challenges, however. Melbourne is increasingly facing pressure from Sydney to become the leading economic hub of Australia. In addition, the city’s property market is becoming increasingly unaffordable, putting pressure on low and middle-income earners.

    Despite these challenges, Melbourne’s economy is forecast to continue booming in the years ahead. Thanks to its strong services sector and growing international profile, the city is set to become one of the most prosperous in the country and the globe.

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