(Data from Domain: Price Forecast Report FY25-26)
Melbourne’s property market is regaining serious momentum. May saw auction clearance rates rise to 67.4% – the highest in nearly two years and the strongest annual growth among all capital cities. Notably, auction volumes were also at their highest for May since 2021, a clear sign that seller confidence is bouncing back.
Although total property supply remains lower year-on-year, new listings surged to their second-highest May level on record. Meanwhile, the average days on market have shortened and vendor discounting has eased – two indicators that the market is shifting from cautious to competitive.
Buyers & Sellers: What This Means for You
For sellers, well-priced homes are attracting strong interest. For buyers, the window of opportunity to negotiate may be narrowing. As competition increases, those who delay risk paying more in the months ahead.
What’s Ahead for Prices?
Property prices in Melbourne are expected to strengthen further from the second half of 2025, with the median house price forecast to hit a record $1.11 million by the end of FY26 – an increase of approximately 6%, or $66,000. This would represent a full recovery from the 2022–2024 downturn.
Melbourne’s Value Advantage
One of Melbourne’s key advantages is its relative affordability compared to other capitals. Back in 2019, Sydney homes were 26% more expensive than Melbourne’s – as of March 2025, that gap has blown out to 63%. Even Brisbane and Adelaide, once 40% cheaper than Melbourne, are now close to parity.
This growing value gap makes Melbourne especially attractive to price-sensitive buyers and investors, particularly in a falling interest rate environment. Lower borrowing costs could further accelerate capital growth as price pressures return.
Population Growth = Long-Term Upside
Victoria is also set to lead the nation in population growth by FY27 – climbing from third place in FY25. Investors might also be drawn in by the potential for capital gains, as falling borrowing costs push up property prices faster than rents.
What About Units?
The apartment market is also expected to recover, albeit more slowly. Melbourne’s median unit price is forecast to reach $584,000 by June 2026 – still 3% below the 2021 peak. Growth in this segment is likely to be tempered by a glut of unsold developer stock, but strong first-home buyer incentives, affordability, and lower interest rates will help support demand.
Bottom Line:
Melbourne’s property market is regaining momentum, with auction clearance rates hitting a two-year high and strong buyer competition emerging. Domain forecasts house prices to reach a record $1.11 million by FY26 – a full recovery from the recent downturn. Melbourne’s relative affordability, population growth, and falling interest rates are expected to drive further gains, with units also set to rise, though at a slower pace.
