Melbourne’s housing market is continuing to navigate a relatively mild downturn, with housing values falling afurther 0.4% in November to be down 2.3% over the past 12 months.
Values are now 5.5% below their record highs set in March of 2022, and they’ve risen by only 12% over the past five years, which is roughly a third of the growth recorded across the combined capitals at 38.3%. Both house and unit values are trending lower, but it’s the house sector recording the larger declines, down 1.2% and 0.7% respectively over the past three months.
Melbourne house prices graph
Similarly, it’s the upper quartile of the value spectrum that’s driving the largest falls, with Melbourne’s most expensive quarter of the market down 1.4% over the past three months compared with a 0.5% fall in values across the lower quartile of the market.
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.
