Melbourne property market stabilises as infrastructure investment and population growth sustain demand

Melbourne's residential property market is showing signs of stabilisation following two years of price pressure from the rapid interest rate cycle, with the median house price settling at approximately $920,000 and early indicators of renewed buyer activity as the interest rate trajectory becomes more favourable. The stabilisation comes despite Melbourne having experienced the most significant price correction of any Australian capital city — approximately 11 per cent from peak — during the tightening cycle.

The correction has created buying opportunities that are attracting investors and owner-occupiers who had been priced out of the Melbourne market at its post-COVID peak, with auction clearance rates recovering to above 70 per cent in the inner and middle ring suburbs that drive overall market sentiment. First home buyer activity has increased as the combination of lower prices and government stamp duty concessions improves accessibility for buyers who had deferred purchases during the peak.

Melbourne's long-term property market fundamentals remain strong. The city is projecting to reach 10 million people by 2050 — the largest metropolitan population of any Australian city — and the infrastructure investment being made through the Suburban Rail Loop, Metro Tunnel, and West Gate Tunnel will create new accessibility corridors that generate property value in currently underserved areas. Property market analysts consistently identify the rail corridors opening through the 2030s as the primary long-term opportunity for strategic property investment in Melbourne.

The rental market remains extremely tight, with vacancy rates near record lows across all dwelling types in inner, middle, and outer suburban Melbourne. The rental pressure is generating significant tenant advocacy and political attention that may lead to tenancy regulation reforms with implications for investor behaviour.

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