Has Melbourne’s property market finally turned a corner?

It has been exactly three years since Melbourne’s last property peak. In this time, our city has been set back by a cocktail of issues; from ongoing economic set back following painful COVID lockdowns, to increasing state government debt, hefty property taxes, heightened cost of living woes, and increased interest rates.

In spite of some of these latter challenges, other capital cities and regions around the nation have flourished. But not until recently has Melbourne showed any sign of recovery.

Last year I was asked to pen an article about when we could anticipate a change of mood for Melbourne and I highlighted the fact that sentiment counts for so much. My prediction was that when we had an interest rate reduction, Melbourne would show signs of a turnaround.

And this seems to be exactly what happened, but there is more to a city’s recovery than a 25 point basis cut to a cash rate.

Yesterday, March 1st was a telling day for something I’d already pre-empted. Our monthly Prop Track data was released, showing Melbourne not only recorded a +0.7% gain for the month, but it topped the list of gains for all capital cities.

The coal face has been suggesting Melbourne’s turnaround started early in 2025, and possibly fuelled in late 2024. Investor participation has increased nationally but we have noticed a substantial increase in sentiment for Melbourne as an investment option. Most of our investors have originated from Perth, Adelaide and Brisbane, (in that order). This is not entirely surprising, as these cities have had the strongest equity gains and the investors are looking for markets with perceived value.

Melbourne not only offers value at price points that other cities are now precluded from. Our city also offers stronger gross rental yields than a few of our other major cities. Despite the land tax cost, investors are still looking broadly at their forecasted rental returns and favouring Melbourne.

The 2025 bounce-back is not solely attributed to investor activity though. Owner-occupiers are out in force, and anecdotally it is upgraders and first home buyers who are pushing hard. Auction participation is far stronger, and unlike 2024, agents are reporting a higher number of bidders than anticipated at most auctions. Last year, if an agent told me that they expected four bidders, I would generally find that four became two. This year, if an agent anticipates four bidders, I’m finding that this translates to six. More than a few agents have responded with comments such as, “I don’t know where he came from, it’s the first time I’ve seen that bidder,” or “We thought they weren’t interested, and then they rocked up and bid.”

Many buyers still remember the trauma of the heady markets of 2021, following emergency interest rate cuts. The FOMO factor, (fear of missing out) drove our market to crazy heights in 2021 and many buyers scrambled to secure a home amongst high pressure, competitive conditions. I have met plenty of buyers who were regretful and/or remorseful about their decisions and choices at this time. Some of those who felt as though their purchase was a mistaken one have since sold at a loss and reaped the consequences of their quick and panicked actions.

For these buyers, getting in early and getting the right property is a task of significant importance.

These early-comers are making up a large portion of today’s home buyers.