20/07/2025
MELBOURNE PROPERTY MARKET UPDATE.
Melbourne’s real estate market in July 2025 is showing solid signs of recovery, marking a notable turnaround after subdued performance in 2024.
Home Values: Median dwelling values have risen for four consecutive months, with a 0.3–0.5% gain in June according to CoreLogic and PropTrack data. The city’s median dwelling value now stands at around $818,000, up 1% year-on-year and $10,600 higher than last year, but still about 1% below the late 2021/early 2022 peak.
Market Drivers:
Tight supply: New listings remain well below average (down 16% on five-year average), while total homes for sale are also falling. This tight marketplace is helping to push prices up.
Rental pressure: The vacancy rate has fallen to 1.1%, the lowest in a decade, putting further upward pressure on rents and resale prices.
Population growth: Melbourne’s population is growing at the fastest pace in Australia (+2% over the year), adding to housing demand.
Interest rate outlook: The official cash rate holds at 3.85%, but expected rate cuts later this year are boosting buyer confidence and activity.
Buyer and seller activity: Auction clearance rates are robust, averaging 72% citywide, with strong competition, especially from first-home buyers and interstate investors. Days on market have dropped to 36 from 51 earlier in the year, and sales volumes are up over 6% year-on-year.
Affordability and challenges: Despite the recovery, affordability remains an issue; it takes over 10 years of median income to save a 20% deposit, and rent consumes about a third of income for the average household. Values are still almost 4% below the 2022 price peak.
Outlook: Experts tip moderate, steady growth for the rest of 2025 and into 2026, with inner and middle-ring suburbs likely to perform best. Momentum is building, but prices remain more affordable than Sydney, suggesting further upside if interest rates fall as predicted.
Paul's takeaway: Melbourne’s property market has clearly turned a corner, with prices rising, buyer competition returning, and low supply creating upward pressure. While affordability is still a hurdle, the overall outlook for the remainder of 2025 is cautiously optimistic, especially for well-located houses and townhouses in established suburbs.
