Melbourne Property Market 2025: Why We’re Buying Again

Melbourne Property Market 2025: Why We’re Buying Again

Melbourne’s property market has spent five years in the shadows—now the data shows it’s entering a new growth phase. In this episode, we break down why we’ve shifted from cautious to active buyers and what’s driving momentum beneath the surface.

You’ll hear how affordability, policy changes, and improving borrowing conditions are creating one of Australia’s strongest early-cycle opportunities. We unpack Melbourne’s underperformance since 2020, the post-lockdown recovery, and why the affordability gap between Sydney and Melbourne is now at a two-decade extreme, signalling major catch-up potential.

We also explore rental trends, tightening vacancy rates, vendor behaviour, and key suburb-level indicators investors should watch. Plus, how to bridge cash flow gaps, pick high-demand locations, and position for sustainable growth as interest rates fall and Victoria’s economy rebounds.

If you’re eyeing Melbourne property investment in 2025, this is your full strategy breakdown. Subscribe, share, and review to help more investors find the show.

Chapters

• 0:00 Why Melbourne, Why Now
• 1:00 COVID Fallout And Market Underperformance
• 3:01 Affordability Gap With Sydney And Peers
• 5:05 Long‑Term Performance Versus Recent Slump
• 6:35 First‑Home Buyer Scheme FOMO
• 7:37 Rents, Vacancy, And Yield Trade‑offs
• 9:08 Low Listings And Demand Shift
• 10:10 Economy Rebounds And Supply Constraints
• 11:22 Rate Cuts And Early Growth Signals
• 12:28 How We’re Investing And CTA

Transcript

SPEAKER_00: 0:00

Why the Melbourne property market in 2025 and beyond? In this episode of the podcast, we'll be breaking down rental income, we'll be breaking down vacancy rates, COVID lockdowns, affordability, and more on the Melbourne property market. My name is Casey Taylor, and I'm the host of the Tailored Property Wealth podcast. And let's get into it today and really break down some of these figures on the Melbourne property market. We released a Melbourne property market update late last year, I believe it was. And at that point in time, we we weren't focusing on Melbourne. It wasn't quite there for us yet, but things have changed now. We are actively purchasing in the Melbourne property market and have been for about six months. And this is kind of this is our first, I guess, acknowledgement that we have been purchasing in Melbourne. We've kind of kept it quiet and now we're talking about it. We've been going in there, like I said, for about six months, and it's really started to shift and change in the Melbourne property market in that period of time. So it is early in its growth cycle, and we believe it's going to perform well. And we're going to tell you why today. Let's get into some different bits and pieces on the Melbourne property market and why there's going to be growth. It's exciting actually once you break down some of this data now that it started to shift and change. Melbourne has done really terribly over the last five years. And historically, it hasn't ever performed this badly. And one of the big areas is because of COVID, because of the lockdowns, and because of how the government handled that. They really negatively influenced both the economy and the property market because of how they handled the COVID lockdowns. All right. So with the lockdowns, it affected retail, hospitality, and even rental demand. Because what a lot of people did in Melbourne, they moved up north, they moved to Brisbane, they they might have moved to New South Wales because they were sick of it. So there was a lot of exodus out of Melbourne at that period of time. Now, historically, a lot of people do move into Melbourne from overseas, but that didn't negatively affect the rental market. And then that retail hospitality was affected as well. And if there's not if there's businesses collapsing, if there's not a lot going on within that economy, it is going to have an effect on property prices in the property market because property is reliant on how it is doing locally. So if there's a massive amount of businesses that have gone bust, if there's a lot of businesses that haven't generated the income that they have, that's going to impede it. And that's exactly what it has done. So we can then look at a couple of things that flow on from that. And right now, Melbourne is very cheap and very affordable. In different areas, we're picking things up from 5 to 550 and also in that six 600 to 750 mark in their three-bed, four-bed properties. So there's a lot of affordability there still. Whereas you look at Brisbane, for example, that a couple of years ago you could get things sub 500, which isn't the case anymore. So there is that affordability piece, and that's going to attract investors. It's already attracted investors. However, it's a lot more affordable to get into that marketplace. Now, if you look at Melbourne property prices in comparison to Sydney property prices, there is a massive gap there at the moment. So Sydney house prices are roughly 70% higher than Melbourne's, with Melbourne homes 41% more affordable than Sydney. And this is making it the largest gap in around 20 years. Now, this data was from Prop Track in 2024. So it's a little bit old. However, the market hasn't moved that much as of yet. So it there is still that margin there. So that is a really important one to look at because history shows that Sydney and Melbourne go together and they're never that far apart. So that affordability piece, we will see Melbourne start to catch back up. So as of the 31st of August 25, the Melbourne median value was 803,194 in comparison to Sydney sitting at 1.224341 mil. Brizzy as well, sitting at 949,583, and Adelaide sitting at 851,125. So out of just those four metros, Melbourne is actually the most affordable where it hasn't been in the past. And we know that if a market has underperformed and we can look at its long-term data and it performs above that, we know it's going to, based on history, overperform in the next, let's say, five years because it's going to catch back up. And this is something as an investor that we always have to remember, there's always going to be peaks and troughs. The marketplace you purchase in isn't going to go up and up and up every single year. But if on the front end, when you're purchasing a property, you can get that short to medium-term above average growth getting into that marketplace, you can ride it, pull that equity out, and go into another marketplace. So as per Cotality, formerly known as Core Logic, Melbourne in the last five years has only grown 16.8%, which essentially is nothing. It is 3% below the peak in 2022. So that right there just shows you how much it just has not performed over the last five years. And if we look at Core Logic's data from 2022, when they were named Core Logic, Melbourne house prices over the last 30 years had increased 459%. That period of time, for that data, Melbourne was the highest performing capital city. So that gives you a really good understanding of what it can look like long term. Let's move on to first home buy scheme. This is sending everyone fucking crazy at the moment. We are seeing some ridiculous, ridiculous numbers just for property now, and it hasn't even, well, at the time of recording this, I'm recording this at 5 30 a.m. on the 1st of October. So it's now in place. But for the last month, there has been a lot of FOMO. There's been people rushing in and paying overs on property to get in before this scheme takes place. Now Melbourne is benefiting from this because the cap is increasing from 800,000 to 950,000. And as we just discussed with that median value across the board, we've got a median value of 803,000. So it's going to jump massively. It's going to be across a lot of different areas that that cap is going to benefit from. All right. So that is a positive one. And that that's across the board, right? It's not just selective to Melbourne, but it's going to have a positive effect. We are going to look next at rental income and vacancy rates of Melbourne. So the rental income over the last 12 months has increased. It's up 3.3% as per SQM research. Now on the flip side of that, we can look at vacancy rates, and vacancy rates are currently sitting at 1.8%. So it's not as tightly held as some of the other metros. However, it it has corrected a lot since COVID. It's jumped up a little bit and it's dropped again. I I anticipate to see this probably drop a little bit over the next couple of years. But that rental income growth is there. And once the economy is thriving again, there is going to be that pressure there once we see those vacancy rates drop as well. But it's still, don't get me wrong, a tightly held market. 1.8% vacancy is still low. Okay. So we know we're going to get rental income growth. And that is one con of Melbourne that you have to understand going into that marketplace is yields are not as strong as some of those other metros, for example, your Brisbane. So your yield is going to be a little bit lower on the front end. That's something you just have to factor in. All right. Sometimes it might be adding a bit of value to boost that yield up. However, it's just part of the parcel with Melbourne. Listing levels. Listing levels, I said this in a previous episode on why the Brisbane property market, you can check that one out. However, listing levels are low across the board in Melbourne over the last 12 months in just a couple of suburbs that I've taken a look at. They're 27% lower and 33% lower. So far less stock on market. And we actually, some of the properties that have been transacting recently were listed last year and didn't sell because the marketplace was a completely different environment then. However, now things are changed. They are selling, and we can see those listing levels right now are a lot lower than they were last year as well. And that's because that demand is starting to absorb some of that stock as well. Medium vendor discount in a number of suburbs is starting to decrease. It's only a couple of days roughly at the moment, some of the suburbs that I did look at, but we are seeing that trend down. State of the state report, which I think this one's interesting knowing what I've just discussed and what Melbourne's done over the last five years, the economy was torn to pieces essentially. Melbourne is now ranked four in the state, fourth, I should say, in the state of the state for July. And it's actually ranked third on the economic growth. So it's seeing that bounce back. There's an undersupply of new housing and building approvals. This one's across the board, but it is also for Melbourne. If we can get into those established areas, we know that that land's scarce. We know there's going to be that pressure. We only ever purchased established property in established areas. Melbourne's got a really diverse economy. And this is why we always like metro locations as well. Not just for a capital growth perspective, but for lowering your risk. So you're not going to a smaller regional where they might be more reliant on one industry. If we can go and get into a diverse economy, which is those metro locations, and they have that diverse economy, it just lowers our risk as an investor. There's less corrections. But that's something I always like to factor. Now they're strong in education, healthcare, finance, tech, professional services. So there is a range there. Interest rate reduction cycle. And I think this has really helped Melbourne shift. It started to shift around February, where we started to see that growth take place in Melbourne. You can see, you can see on some charts, and I'll probably do some short reels on this in the future on a couple of suburbs in Melbourne where they're kind of tanked out. They're at the bottom and they're starting their growth cycle now. The rate cuts have really started to positively influence that. People, their holding costs have improved. They can borrow when maybe they couldn't, or they're just taking action now because of those holding costs. I think that has benefited the Melbourne property market. Three rate cuts we've had for 2025. The RBA just held yesterday on the last day of September. However, we do see, expect to see another couple of rate reductions over the next six months, let's call it. The big four still predicting a couple of rate cuts. That's it for today on why we like the Melbourne property market now, the back end of 2025, why we're investing in the Melbourne property market now, and why we think it's going to perform well in the future. If you want help in purchasing your next property, if you want to make sure you get that right, you build the wealth, you can create equity to leverage into another property and really build a portfolio to get you to financial freedom. Reach out, we can book in a discovery call and see if you might be one of the clients that we choose to work with each month. Our spots are limited. We do not work with everyone, and we want to work with people who share the same values as us but operate well. We do not chase clients. If your communication is not there, you might not be the right fit for our business. So reach out, we can book in a call and go from there. I hope you have a fantastic day, and we'll see you on the next episode.