Melbourne, historically one of Australia’s top property markets alongside Sydney, has seen its home value growth stagnate in recent years. Factors such as a robust job market, high migration rates, and its reputation as a highly liveable city have traditionally bolstered Melbourne’s real estate market. However, this momentum has slowed, while other cities continue to thrive.
In a notable shift, Brisbane’s median home value surpassed Melbourne’s for the first time in 14 years this March, making it the second most expensive city in Australia. According to PropTrack’s automated valuation model (AVM), Brisbane’s median house values surged by 4.4% during the quarter, while Melbourne’s saw a marginal increase of just 0.1%. Similarly, unit values in Brisbane rose by 7.4%, compared to a slight decline of -0.1% in Melbourne.
By June, Brisbane’s house value reached $951,000, outpacing Melbourne’s $912,000. For units, Brisbane’s value stood at $633,000, higher than Melbourne’s $619,000. This trend isn’t new; over the past year, Brisbane has seen house values climb by 14.7% and unit values by 20.3%, while Melbourne’s growth has been minimal at 0.3% for houses and 0.2% for units.
Other cities like Adelaide and Perth have also experienced significant growth, indicating that they might soon overtake Melbourne if current trends continue.
The root of Melbourne’s challenges can be traced back to the COVID-19 pandemic, which impacted the city more severely than others. Melbourne experienced higher population losses due to interstate migration and faced prolonged border closures, which led to decreased demand for inner-city rental properties and a subsequent exodus of investors.
Conversely, cities like Brisbane, Adelaide, and Hobart, which were less affected by lockdowns, attracted more interstate migrants, bolstering their property markets. As a result, Melbourne’s property market struggled to recover throughout 2021, and by the time interest rates began to rise in 2022, it was already lagging behind other cities.
As of June 2024, Melbourne’s property prices were still 3.89% below their previous peak, whereas Sydney, Brisbane, Adelaide, and Perth had all reached new highs. This slower recovery has made sellers more reluctant to list their properties, further hampering the market’s rebound.
A recent Residential Audience Pulse survey by realestate.com.au revealed that only 19% of Victorian respondents felt it was a good time to sell, compared to 37% in Queensland and 25% in New South Wales. Higher interest rates and the rising cost of living have reduced borrowing power, making buyers more cautious. Consequently, auction clearance rates in Melbourne are more subdued compared to the previous year.
Despite these challenges, Melbourne’s property market remains active. Sales figures for June were up 16% compared to the previous year. However, buyer expectations have adjusted, with many unwilling to pay the high prices seen in more prosperous times. In June, over half of the properties sold in Melbourne matched the asking price, more than a third sold for less, and only 14% exceeded the asking price. This contrasts with Brisbane and Adelaide, where over half of the sales surpassed the asking price, and Perth, where 77% did.
This conservative approach by Melbourne buyers helps explain the city’s slower median price growth compared to other cities. Nevertheless, this does not suggest a failing market. Buyer and seller activity continues, and most market indicators remain positive. Melbourne appears to be in a period of adjustment, with prices stabilizing after years of robust growth.
