Melbourne's Property Market Post-Pandemic: Analysing Trends and Predicting Future Growth

Melbourne’s property market is one of the most scrutinised, analysed and dissected in Australia. Now the country’s largest city, investors will always hold intense interest in Melbourne.

Melbourne has been a bit of a rollercoaster over the past few years, with surging prices in COVID, and a couple of significant falls as well.

Here, the property consultants at Patrick Leo analyse the trends of Melbourne’s property market and make some key predictions about future growth.

Post-pandemic Melbourne market analysis

The Melbourne property market boomed throughout 2020 and 2021, surging over 15% as a whole. Since 2023, however, things have slowed down, and that rapid growth we saw during COVID hasn’t been replicated since. So, what’s in store for the next few years?

• A Slow Year
  Recent reports indicate that Melbourne's property market will experience a sluggish 12 months. According to Oxford Economics Australia, median house prices in Melbourne are expected to increase by only 0.7% in the coming year. This forecast is attributed to a decline in clearance rates (from 77.7% in May 2023 to 65% in March 2024) and a rise in investor sell-offs due to higher state government and land taxes.




• 5.5% Growth by 2026… really?
  However, the outlook isn’t entirely bleak. Oxford Economics Australia also projects a significant 5.5% rise in Melbourne’s property market by mid-2026, despite the tax increases. This growth is expected to be driven by interstate and international migration, boosting property demand across Melbourne. Consequently, median house prices are anticipated to jump from $1.04 million to $1.157 million within two years.
  
  This presents positive prospects for investors seeking long-term stability in the Melbourne market.




• A Tight Rental Market
  Currently, all Australian capital cities, including Melbourne, are facing extremely tight rental markets. The high demand for rental properties coupled with a severe housing shortage has driven Melbourne's vacancy rates to a historic low of 1.5%. For context, a balanced market typically has a vacancy rate between 2-2.5%.




• Units to Outperform Houses
  Oxford Economics also forecasts that units will outperform houses nationwide, including in Melbourne. As house prices continue to rise, more buyers are likely to be priced out of the housing market, turning instead to units. Additionally, the steep increase in the cost of building new apartments is expected to elevate existing unit prices.

The takeaway

So, what will our crystal ball reveal? We can’t be sure of much, apart from one thing: historically, property in Melbourne (and the rest of Australia) only goes up in value. If you’re ready to enter the property market in Melbourne, consult the experts at Patrick Leo. As Australia’s leading property specialists, we help Aussies secure high quality property that boosts their financial position and enriches their life as a whole. Talk to our team today to learn more.