Melbourne’s property market has seen a lot of changes in 2024. House prices have dropped slightly, with the median house price now sitting at $925,762, which is 1.3% lower than it was this time last year.
Meanwhile, units (like apartments) have been more stable. The median price for units is $612,215, which is only down 1.6% compared to last year.
This shift comes after years of rapid price growth, and while Melbourne is still an expensive city to buy a home, prices aren’t climbing as quickly as they once were.
So, if you’re thinking about buying property in Melbourne, it’s important to understand what’s going on in the market, why prices are changing, and what might happen next.
What’s Causing Melbourne’s House Prices to Change?
Several things are affecting house prices in Melbourne right now. One of the biggest reasons is interest rates. The Reserve Bank of Australia has kept interest rates high at 4.35%, which makes it more expensive for people to borrow money to buy a home.
Higher interest rates mean bigger mortgage repayments, so fewer people can afford to buy, which leads to lower demand and, in turn, lower house prices.
At the same time, there are more homes for sale. In September 2024, housing listings were 7.9% higher than they were a year ago. More homes on the market means buyers have more choices, which can also help keep prices from rising too quickly.
However, new homes aren’t being listed as much as before. New listings dropped by 3.3%, which shows that some people are holding off selling their homes, possibly waiting for prices to go up again. This could slow down any major price drops in the coming months.
Units Are Doing Better Than Houses
While house prices are dropping, units (apartments or townhouses) are holding up much better. In fact, the median unit price actually went up 0.1% in the last month.
This is because units are usually more affordable than houses, so they’re still in high demand, especially from first-home buyers and people looking for investment properties.
Here’s a quick look at the weekly asking prices for houses and units as of October 2024:
| Property Type | Price ($) | Weekly Change | Monthly Change | Quarterly Change | 12-Month Change |
|---|---|---|---|---|---|
| All Houses | 1,248,169 | +4,840 | +1.0% | +0.2% | +4.6% |
| 3-Bed Houses | 1,102,531 | +714 | -0.5% | -1.6% | +1.6% |
| All Units | 612,068 | -168 | +0.6% | +1.1% | +3.4% |
| 2-Bed Units | 601,174 | -174 | +0.2% | +0.3% | +2.3% |
| Combined (All Types) | 1,048,432 | +3,267 | +0.9% | +0.3% | +4.1% |
The Rental Market is Tight
If you’re thinking about renting in Melbourne instead of buying, be prepared for high competition. The vacancy rate (the number of available rental properties) is only 1.7%, which means there aren’t many rentals available, and demand is high.
As of October 2024, the median weekly rent for houses is $740.54, while units are renting for $549.44 per week.
Even though rents have dipped a little in recent weeks, they’ve still gone up a lot compared to last year, with a 5.4% increase for houses and a 5.2% increase for units. This is likely to continue as more people look to rent rather than buy in the current market.
Here’s a breakdown of weekly rents in Melbourne:
| Property Type | Weekly Rent ($) | Weekly Change | Monthly Change | Quarterly Change | 12-Month Change |
|---|---|---|---|---|---|
| All Houses | 740.54 | -4.54 | -0.5% | -0.6% | +5.4% |
| 3-Bed Houses | 699.71 | -1.71 | -1.5% | -2.1% | +6.4% |
| All Units | 549.44 | -0.44 | -1.6% | -1.9% | +5.2% |
| 2-Bed Units | 562.58 | -0.58 | -0.1% | -1.6% | +4.4% |
| Combined (All Types) | 628.44 | -2.14 | -1.1% | -1.2% | +5.4% |
Why Interest Rates Matter So Much
One of the main reasons house prices are dropping is because of high interest rates. When interest rates go up, it costs more to borrow money from the bank, which means your monthly mortgage payments will be higher.
For many people, that makes buying a home less affordable, and it limits how much they can borrow. This has led to fewer people buying homes, which is driving prices down.
Right now, the cash rate set by the Reserve Bank of Australia is 4.35%, and it’s expected to stay at this level for the rest of 2024. This means that, for now, mortgage repayments will stay high, and property prices will likely remain steady or drop slightly.
Government Incentives Aren’t Enough
The government is still offering some help for first-home buyers through schemes like the First Home Owner Grant (FHOG).
This grant gives first-time buyers $10,000 to help them buy a new home that costs less than $750,000. But in a city like Melbourne, where the median house price is over $900,000, it’s becoming harder to find homes that qualify for this grant.
Other government incentives, like stamp duty exemptions for homes under $600,000, are also available, but with prices so high, these programs don’t help as many people as they used to.
What’s Next for Melbourne Property Prices?
Most experts believe that Melbourne’s property market will stay pretty stable for the rest of 2024, with little to no price growth.
Westpac and NAB are predicting that prices will stay flat or drop by up to 0.7% this year. However, things could improve in 2025, with forecasts of 3% to 3.7% price growth, especially if interest rates start to come down.
For investors, the unit market may be a better bet, as units are holding their value better than houses. But anyone looking to buy should keep a close eye on interest rates and be prepared for any changes that could affect their mortgage repayments.
Suggested reading: We’ve got more for you! Expand your real estate knowledge by reading our article answering, will house prices drop in Melbourne?
Is Now a Good Time to Buy in Melbourne?
Buying a home in Melbourne right now depends on your personal situation. While house prices have dropped, they’re still high compared to most other Australian cities.
If you’re looking for more affordable options, units are performing better and could offer good value, especially if you’re a first-time buyer or investor.
However, with interest rates still high, it might be worth waiting until late 2024 or 2025 when rates are expected to come down.
This could make buying a home more affordable. In the meantime, if you’re planning to rent, be aware that the rental market is very competitive, with limited availability and rising prices.
For those interested in the latest listings, explore houses for sale in Melbourne to get a real-time view of the market.
FAQs on ‘What Is Happening to Property Prices in Melbourne?’
Are house prices in Melbourne dropping?
Yes, house prices in Melbourne have declined. As of September 2024, the typical house value has dropped by 1.75% to $914,000 compared to the same time in 2023. In the past month alone, there has been a further $2000 decrease.
Which Melbourne suburbs are going up in value?
Several Melbourne suburbs have seen growth in value. The top growth suburbs as of September 2024 include:
- Kew: $2,810,000 (8.5% increase)
- Burwood: $1,452,000 (8.4% increase)
- Yarraville: $1,255,000 (8.2% increase)
- Beaumaris: $2,030,500 (8.0% increase)
Is it a good time to sell property in Melbourne?
Spring is often considered the best time to sell in Melbourne. There are typically more property listings during this season, which can attract more potential buyers compared to the winter months.
What will the price of houses be in Melbourne in 2025?
Melbourne’s housing market is expected to recover by June 2025, with the median house price predicted to reach approximately $950,000.
