Why Melbourne’s property market is suddenly so appealing

Potential homebuyers may be best placed to set their sights on Melbourne, with new data revealing Australia’s largest city recorded significantly less growth than other capitals since the pandemic began.

Figures from CoreLogic show  that house values rose by just 1.6 percent between March 2020 and May 2023 compared with a stronger 16.5 percent gain in Sydney prices and a whopping 45.2 percent surge in Adelaide.

The increases have started to close the value gaps between Melbourne and the smaller capitals such as Brisbane, Adelaide and Perth, said CoreLogic Asia Pacific research director Tim Lawless.

“Every capital city other than Canberra – the country’s second most expensive capital for houses – has significantly closed the house value gap to Melbourne,” he said. “At the onset of COVID, Brisbane houses were 47 percent cheaper than Melbourne. That affordability gap has closed to just 15 percent.

“Melbourne was 85 percent more expensive than Adelaide at the start of COVID but the gap has narrowed to just 29 percent and in Perth, where the gap was 88 percent, Melbourne house values are now 50 percent higher.”

Like most Australian capitals, Melbourne’s values fell at the start of COVID. During 2020, values declined by -6.7 percent according to CoreLogic, followed by substantial growth of 20.6 percent. This preceded  another decline of -11.7 percent, with the market finding the floor in February this year. Since then, prices have grown 1.7 percent to May this year.

Melbourne is consistently ranked Australia’s most liveable city and was last year named the third most liveable city in the world by the Economist Intelligence Unit’s Global 2022 Liveability Index.

Mr Lawless said the latest data would likely make Melbourne a more attractive option for homebuyers and investors.

“With housing affordability remaining stretched, this improvement in Melbourne’s value proposition could place Australia’s second largest city in a more competitive position to attract a greater share of housing market participants,” he said. 

“The city’s advertised supply level is trending lower and is -13.4 percent below levels at the same time last year and -7.0 percent below the previous five-year average.  

“Melbourne’s rental vacancy rate of 0.8 percent in May is also one of the lowest in the country and yet another potential factor supporting purchasing demand for those with the financial capacity to enter the market.”