Melbourne home values still below 2022 peak, five-year growth flat

The data, reported by Caroline Zielinski in The Age, Sydney Morning Herald and Brisbane Times, shows that Melbourne’s median home value peaked during the pandemic-fuelled boom of early 2022 and has since declined. Despite recent interest rate cuts and strong population growth, prices have failed to regain that peak, leaving many homeowners with minimal or negative capital growth over the past five years.

Melbourne’s housing market experienced a dramatic run-up between 2020 and 2022, driven by record-low interest rates, government stimulus and shifting preferences towards more space. The Reserve Bank of Australia then embarked on the fastest tightening cycle in decades, lifting the cash rate from 0.1% to 4.35% between May 2022 and late 2023. Melbourne was particularly hard hit, with values falling more sharply than other capitals. Even after a modest recovery in 2024-25, the median remains below the 2022 zenith.

Housing analysts attribute the slower rebound in Melbourne to several factors: higher land tax and stamp duty costs, a significant oversupply of apartments in inner-city areas, and stricter lending standards. In contrast, Sydney’s median has recently surpassed its previous peak, while Brisbane’s market has boomed on the back of interstate migration and the Olympic effect.

For typical Melbourne homeowners who bought near the peak, the stagnation means their property is effectively worth less in real terms when adjusted for inflation. First-home buyers, however, may find the market more accessible, with lower entry prices and less competition from investors. The Real Estate Institute of Victoria has called for state government measures to stimulate demand, including stamp duty cuts, while cautioning that the market remains fragile. Critics argue that further stimulus could reignite unaffordability without addressing underlying supply constraints.

The broader economic implications are significant. Housing wealth is a key driver of consumer confidence and spending. Flat or falling values could weigh on household sentiment, particularly in a state where property taxes are a major revenue source. The City of Melbourne is also grappling with high office vacancy rates and a slower-than-expected return to CBD activity, compounding the housing market’s sluggishness.

Analysis

Why This Matters

Household wealth: For the millions of Melburnians who own their home, stagnant or falling values erode net worth and a key source of retirement savings.
First-home buyers: Lower prices improve affordability, but rising borrowing costs and deposit requirements remain barriers.
Policy implications: State and federal governments face pressure to intervene as housing becomes a political flashpoint ahead of the next election.

Background

Melbourne’s housing market has been one of Australia’s most volatile since the pandemic. A boom in 2020-21, fuelled by ultra-low interest rates and HomeBuilder grants, drove median prices to record highs by early 2022. The RBA’s aggressive rate hikes from May 2022 triggered the steepest downturn since the early 1990s, with Melbourne’s median falling around 10% from peak to trough. Since rates stabilised in late 2024, prices have partially recovered but remain below the 2022 peak. This contrasts with Sydney, which has regained its peak, and Brisbane, where population growth has pushed values 20% higher.

Key Perspectives

Existing homeowners: Those who bought at or near the 2022 peak face potential negative equity if they need to sell. Many are ‘mortgage prisoners’ locked into higher rates, unable to refinance. They want lower taxes and interest rate relief. First-home buyers: The market is more accessible than it was three years ago, but high deposit requirements and uncertainty about further price falls keep many on the sidelines. Real Estate Institute of Victoria: Cautiously optimistic, arguing that population growth and limited new supply will eventually push prices up. They advocate for stamp duty reform and rezoning to encourage construction. Economists and critics: Warn that Melbourne’s structural issues – including high construction costs, infrastructure deficits and policy uncertainty – may prolong the slump. Some say the market needs a correction to restore affordability.

What to Watch

RBA cash rate decisions: Any further reductions would boost borrowing capacity and confidence; a hold or increase would deepen the downturn.
Net interstate migration to Victoria: If the trend of Melburnians moving to Queensland continues, demand softens further.
Victorian state budget measures: Potential stamp duty cuts or land tax relief could stimulate transactions.
New housing starts and completions: A sharp drop in supply could eventually push prices higher, but an oversupply of apartments in the inner city weighs on values.

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