Melbourne’s housing market has continued a trend of relatively flat conditions with dwelling values rising by 0.1% in May, a lift from the past 2 months where values edged lower.

Melbourne Housing Market Update | June 2024

The rolling quarterly trend has been in negative territory since the beginning of the year with values down 0.3% through the year to date.

The unit sector has performed a little better with values up 0.7% over the month to be 1.7% higher over the first five months of the year compared with houses where values were unchanged over the month but 0.3% lower over the year to date.

And some good news for renters, annual rental growth is losing some steam, easing back from 9% over the year to May 2024, the lowest annual change since February of 2023.

Melbourne Housing Market Update May 2024

Melbourne house prices – what happened in 2023

The Melbourne property market has been one of the strongest and most consistent performers over the last four decades.

But the COVID-19 pandemic and numerous city lockdowns hit the city hard – many residents fled northwards to Queensland and closed borders halted migration from overseas.

From the economic fallout of the COVID-19 pandemic and being locked down for longer than any other city in the world, to 13 interest rate rises, the lowest level of consumer confidence in decades, and a continuous conveyor belt of negative messages in the media, tightening of lending restrictions, the Melbourne property markets have faced considerable headwinds.

After booming through 2020 and 2021 with prices rising by 15.8%, Melbourne housing values fell -7.9% from their peak in March 2022 through to the recent trough in January 2023, as you can see from SQM Research’s data shows below.

While the Melbourne housing market turned the corner in early 2023, property price growth has been slower than in some other capital cities.

Any way that you look at it, Melbourne has now clearly passed the bottom of the downturn, and while Melbourne has not seen as sharp a recovery in prices this year as Sydney has, it also did not see as large a decline in 2022.

And there are firm indications that Melbourne property values will keep rising in 2024.

Having said that, Melbourne’s housing markets were fragmented in 2023 and more than 50 Victorian suburbs saw house prices exceed the average national house price growth for the year.

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, with property prices in most regional centres in Victoria falling or at best only stabilising.

And it’s worth remembering that even though Melbourne’s property market underperformed in 2023, it has been one of the strongest and most consistent performers over the last four decades.

Melbourne house prices – the longer-term data

CoreLogic’s data shows how prices in the Melbourne property market have surged and fallen over the longer term, and the extreme dwelling value changes over the past few years in particular.

As you can see on the chart, Melbourne enjoyed an uptick in property prices in 2021, but the surge reached nowhere close to what was experienced in other combined capitals.

Likewise, today’s uptick falls short of the recovery seen in other cities.

But, looking back even further over the last 30 years, Melbourne house prices are up 459% (5.9% per annum), which is the highest long-term growth rate of any capital city.

The earliest decade (1992-2002) recorded the strongest housing market conditions, with dwelling values up 95%, compared with a 69% rise through both the middle decade and the most recent decade.

House values have risen more than unit values over the 30-year period, with the 519% gain equating to a dollar value increase of approximately $809,140.

By comparison, house prices rose 389% in Brisbane and 507% in Sydney over the same 30-year period.

Meanwhile, Melbourne’s unit values are 354% higher, providing a $479,060 increase in approximate dollar terms.

Houses located within the Yarra SA3 region have recorded the highest long-term capital gain, ranking in the top growth position nationally with a rise of 779% in house values over the past three decades, equating to an approximate dollar value gain of $1,405,850.

Melbourne’s housing market – the forecast for 2024

Digging deeper into the stats, some Melbourne properties – bearing in mind there are multiple markets within markets – have far outperformed others.

But it seems that freestanding Melbourne houses within a close distance of the CBD or in good school catchment zones are the most stable.

Generally, Melbourne’s Inner and Outer East are outperforming marginally while the North West and West are seeing prices stabilise rather than rise.

It really is a tale of two cities – while some properties over-perform, others underperform.

However, the expert consensus is that strong population growth and tight supply will continue to push property prices upwards as we move through this next stage of the property cycle.

And that is even in the face of the Reserve Bank continually hiking interest rates in order to get on top of Australia’s soaring inflation levels.

While Melbourne’s property market has lagged Sydney and Brisbane, there are clear indicators that it will continue on its upwards trajectory.

Here are some of the most recent expert forecasts to take note of:

  • ANZ forecasts a 3-4% property price rise in Melbourne in 2024.
  • CBA forecasts a 5% property price rise in Melbourne in 2024.
  • NAB forecasts a 5.5% property price rise in Melbourne in 2024.
  • Westpac forecasts a 3% property price rise in Melbourne in 2024.
  • PropTrack forecasts a 1-4% property price rise in Melbourne in 2024.
  • SQM forecasts up to a -3% property price fall in Melbourne in 2024.

You can read our Sydney housing market update here and the Brisbane housing market update here.

About Michael Yardney
Michael is a director of Metropole Property Strategists who create wealth for their clients through independent, unbiased property advice and advocacy. He's been voted Australia's leading property investment adviser and his opinions are regularly featured in the media.