Melbourne’s property market is experiencing a strong resurgence, fuelled by interest rate cuts, growing buyer confidence, and investment opportunities. In February 2025, Melbourne led the nation in property price growth, marking a significant shift after a period of stagnation.
With national property values rising and Melbourne outperforming other capital cities, investors and homebuyers are looking to take advantage of affordable prices before the next growth phase.
Interest Rate Cuts Fuel Demand
The Reserve Bank of Australia’s (RBA) 0.25% rate cut in February 2025 has played a key role in reigniting buyer sentiment. This is the first rate cut in over four years and has boosted borrowing power, making homeownership and investment more accessible.
- National property prices increased by 0.3% in February
- Melbourne and Hobart recorded a 0.4% price rise, benefitting from renewed demand
- The rate cut has prompted investors and first-home buyers to re-enter the market
Melbourne’s Market Performance
What This Data Shows:
This chart highlights the monthly and annual price changes across Australia. Melbourne saw strong monthly growth, although its annual figures remain slightly negative. This suggests a market correction is underway, presenting opportunities for buyers to enter before further appreciation.
With borrowing now cheaper, demand is likely to push prices higher in the coming months. Investors looking to enter the market should act before property values rise further.
Melbourne Outperforms Other Capital Cities
Melbourne’s property values increased by 0.68% in February, according to PropTrack’s Home Price Index, surpassing Sydney and Brisbane. The median house price now sits at $892,000, while units have risen to $576,000.
Despite these gains, house prices are still 2.56% lower than last year, meaning there is still room for further recovery.
How Melbourne Compares to Other Cities
What This Data Shows:
- Melbourne has outpaced other capitals in price growth for the first time in years
- The recovery is still in progress, with prices lower than their 2023-2024 peaks
- Investors are taking advantage of relative affordability compared to Sydney
Melbourne’s market is in a strong recovery phase, and those who buy now could benefit from higher capital growth over the coming years.
Long-Term Growth Prospects – Melbourne Leading by 2030
Looking ahead, Melbourne is expected to outperform other Australian cities in property price growth by 2030.
- Past economic slowdowns and investor pullbacks have left room for significant growth potential
- Infrastructure development and population growth will fuel long-term demand
- Investors are already capitalising on the opportunities, similar to what was seen in Perth and Brisbane in recent years
Historically, cities that have lagged in growth often experience stronger rebounds. This suggests Melbourne could become the best-performing market in the next decade.
Innovative Housing Solutions – The Rise of Granny Pods
With housing affordability being a key concern, innovative solutions are gaining popularity. One of these solutions is the rise of “Granny Pods”, which are modular, off-site built homes that cater to:
- Multi-generational living
- Affordable property additions
- Faster, cost-effective builds compared to traditional homes
With state legislation changes supporting their implementation, granny pods are emerging as a major solution to Australia’s housing supply challenges.
Is Now the Right Time to Buy?
Melbourne’s property market is bouncing back. The combination of interest rate cuts, affordability, and long-term growth prospects makes it one of the most promising markets in Australia right now.