Five Year Outlook for Melbourne

By Guest Blogger, Terry Ryder, founder, hotspotting.com.au

After several years in which smaller cities and regional centres dominated real estate growth, the big cities are making a major comeback – headed by a notable revival in markets across Greater Melbourne.

Hotspotting foreshadowed a Melbourne revival late in 2024, when we saw the first signs of recovery in our quarterly analysis of sales activity figures. The Melbourne comeback was confirmed in the March 2025 Quarter figures and even more emphatically in the June 2025 Quarter figures.

Melbourne on the Rise

The June Quarter recorded the highest number of sales in the Greater Melbourne market since the peak of the Covid boom (in the December 2021 quarter) and two-thirds of Melbourne markets now have positive trends with their sales activity. Indeed, some sections of the city’s market have become as frenzied as Perth and Regional Queensland were in their recent booms.

So, after weak performance in 2023 and 2024, Melbourne is now a strongly rising market and solid price growth is part of its immediate future.

Regional Victoria is on board with the trend in the state capital and regional sales are also the highest since the Covid peak. Sales volumes have been generally trending upwards in recent quarters – and are now 16% higher than a year ago and 28% higher than the same quarter two years ago.

The Melbourne uplift coincides with a significant increase in the number of unit sales – the highest quarterly number of unit sales since the peak of the 2021 boom, and only marginally lower than that 2021 peak. The market share of units has risen from 34% of total Greater Melbourne sales six months ago to 35% three months ago and 37% now – led by strong demand in the City of Melbourne LGA, which includes the CBD and near-city suburbs.

The leading precincts in Greater Melbourne – in addition of the inner-city unit markets – are the LGAs of Frankston, Hume and Casey – which all have relative affordability as their common feature.

The City of Frankson in the far south-east has recorded quarterly sales of 695, 730, 787, 811, 812, 954 over the past eighteen months – a pattern of rising buyer demand which is translating into rapid price growth, headed by the house markets in Frankston, Frankston South, Langwarrin and Seaford.

Hume in the north of Greater Melbourne is also dominated by markets with positive trends. Sales activity has jumped 27% in the latest quarter, from 1,202 to 1,529 house and unit sales. Standout locations include Mickleham and Kalkallo.

The City of Melbourne is characterised by affordable units, with total sales of 1,445, 1,435, 1,563, 1,460 and 1,698 in the past five quarters. The unit markets in Carlton, North Melbourne, Port Melbourne, Southbank and the CBD are all thriving.

Other LGAs with an uplift in sales levels include Casey, Whittlesea, Darebin and Moonee Valley.

The revival in Victoria markets is being largely driven by home buyers. Melbourne has high population growth boosted by overseas migrants and there is a significant program of big infrastructure projects, notably transport infrastructure developments. The uplift in Regional Victoria is being driven by internal migrants – people leaving Melbourne and moving to regional markets close to the state capital. Geelong is a leading recipient.

Other Regional Victoria locations experiencing revival as home buyers seek the affordable lifestyle dream include Ballarat, Bendigo and Shepparton, with opportunities to buy houses in the $400,000s and $500,000s.

A feature of the Regional Victoria market is the number of towns with highly consistent sales activity over the past two or more years. Standouts include Colac, Echuca, Gisborne, Stawell, Swan Hill, Warragul and Yarrawonga.

Government Property Taxes Handbrake

There are also signs that investors are starting to overcome their reluctance to invest in Victoria, which has the highest property taxes in Australia. Stamp duty levels are particularly high and recent changes to the land tax thresholds mean investors are paying more of that insidious and archaic impost in Victoria than elsewhere in Australia.

Some home-owners are discovering to their horror that they have generated land tax liabilities by working from a home office.

The State Government of Victoria has a recent track record of introducing new taxes, mostly targeted on the property sector, including a hefty impost on anyone who uses short-term letting options, a vacant property tax hitting people with holiday homes and an emergency services levy on property owners. Recent changes to the laws governing the relationship between landlords and tenants have been highly unfavourable to investors.

These impositions have caused many investor owners to sell up and leave Victoria in recent years. Around 24,000 rental properties were lost from the Victorian market in a single year.

A recent Property Council report claimed that student accommodation developments were being placed at risk by the State Government’s high taxes.

Investors Seeing Value

The latest NAB Residential Property Survey revealed that investor buyers are active around Australia but they are least active in Victoria. So there remains a reluctance to enter the state’s market for fear of what the State Government next has in store.

But investors will increasingly be hearing about big price growth in Melbourne and other Victoria markets and some at least will be tempted to overcome their hesitancy. The ongoing lack of rental properties, and early stage of the Melbourne recovery will provide opportunities for astute investors looking to capitalise on the next growth phase of Melbourne property cycle.

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